Hard currency

In macroeconomics, hard currency, safe-haven currency, or strong currency is any globally traded currency that serves as a reliable and stable store of value. Factors contributing to a currency's hard status might include the stability and reliability of the respective state's legal and bureaucratic institutions, level of corruption, long-term stability of its purchasing power, the associated country's political and fiscal condition and outlook, and the policy posture of the issuing central bank. Safe haven currency is defined as a currency which behaves like a hedge for a reference portfolio of risky assets conditional on movements in global risk aversion. Conversely, a weak or soft currency is one which is expected to fluctuate erratically or depreciate against other currencies. Softness is typically the result of weak legal institutions and/or political or fiscal instability. The paper currencies of some developed countries have earned recognition as hard currencies at various times, including the United States dollar, euro, Japanese yen, British pound sterling, Swiss franc and to a lesser extent the Canadian dollar and Australian dollar. As times change, a currency that is considered weak at one time may become stronger, or vice versa. One barometer of hard currencies is how they are favored within the foreign-exchange reserves of countries: The US dollar (USD) has been considered a strong currency for much of its history. Despite the Nixon shock of 1971, and the United States' growing fiscal and trade deficits, most of the world's monetary systems have been tied to the US dollar due to the Bretton Woods system and dollarization. Countries have thus been compelled to purchase dollars for their foreign exchange reserves, denominate their commodities in dollars for foreign trade, or even use dollars domestically, thus buoying the currency's value. The euro (EUR) has also been considered a hard currency for much of its short history. However, the European sovereign debt crisis has partially eroded that confidence.

About this result

This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.

Related publications (8)

Related concepts (14)

Related courses (3)

Related lectures (32)

Comecon

The Council for Mutual Economic Assistance (Сове́т Экономи́ческой Взаимопо́мощи, СЭВ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along with a number of socialist states elsewhere in the world. The descriptive term was often applied to all multilateral activities involving members of the organization, rather than being restricted to the direct functions of Comecon and its organs.

Foreign exchange reserves

Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.

Cold War

The Cold War was a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term cold war is used because there was no large-scale fighting directly between the two superpowers, but they each supported opposing sides in major regional conflicts known as proxy wars. The conflict was based on the ideological and geopolitical struggle for global influence by these two superpowers, following their roles as the Allies of World War II that led to victory against Nazi Germany and Imperial Japan in 1945.

FIN-523: Global business environment

This course gives the framework and tools for understanding economic events, taking financial decisions and evaluating investment opportunities in a global economy. It builds up an integrated model of

FIN-405: Investments

The course covers a wide range of topics in investment analysis

FIN-404: Derivatives

The objective of this course is to provide a detailed coverage of the standard models for the valuation and hedging of derivatives products such as European options, American options, forward contract

Monetary Independence And Rollover Crises

Jorge Mondragon Minero

This article shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nomin ...

OXFORD UNIV PRESS INC2022

Exchange Rate Analysis by Nonlinear Time Series Method

Maria-Alexandra Paun

A financial data analysis using the time series method has been performed. At the same time a correct interpretation of daily exchange rates fluctuations, for Eur foreign currencies is presented. The fractal dimension evaluation has been performed using th ...

AMER INST PHYSICS2020

Democratic Value and Money for Decentralized Digital Society

Bryan Alexander Ford

Classical monetary systems regularly subject the most vulnerable majority of the world's population to debilitating financial shocks, and have manifestly allowed uncontrolled global inequality over the long term. Given these basic failures, how can we avoi ...

2020

Exchange Rates and PPP HUM-471: Economic growth and sustainability I

Explores purchasing power parity, exchange rates, and GDP comparisons across countries.

Network Inference from Textual Evidence

Delves into network inference from textual evidence, exploring information propagation, translation, and multi-input attention.

The Internationalization of RMB: Economy of China HUM-249: Competing with China

Explores the internationalization of the Renminbi and its impact on the global economy, focusing on China's economic reforms and the RMB's potential as a global currency.