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{{Short description|Reliable and stable globally-traded currency}}{{Not to be confused with|Hard money (policy)}}
[[File:Monnaie de Bactriane, Eucratide I, face.jpg|thumb|A [[gold coin]] is a form of hard currency whose value derives from its [[precious metal]] content, in contrast to [[fiat money]], whose value rests on government decree and [[monetary policy]], which makes it subject to [[inflation]] and [[debasement]].]]
{{Foreign exchange}}

In [[macroeconomics]], '''hard currency''', '''safe-haven currency''', or '''strong currency''' is any [[Foreign exchange market|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 policy|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 (finance)|hedge]] for a reference portfolio of risky assets conditional on movements in global [[risk aversion]].<ref>{{Cite journal|last1=Habib|first1=Maurizio M.|last2=Stracca|first2=Livio|date=2012-05-01|title=Getting beyond carry trade: What makes a safe haven currency?|journal=Journal of International Economics|series=Symposium on the Global Dimensions of the Financial Crisis|volume=87|issue=1|pages=50–64|doi=10.1016/j.jinteco.2011.12.005|hdl=10419/153722|s2cid=55678634|hdl-access=free}}</ref> 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. '''Junk currency''' is even less trusted than soft currency, and has a very low currency value. Soft and junk currencies often suffer sharp falls in value.

== History ==
The paper currencies of some [[developed countries]] have earned recognition as hard currencies at various times, including the [[United States dollar]], [[euro]], [[British pound sterling]], [[Japanese yen]],  [[Swiss franc]]  and to a lesser extent the [[Canadian dollar]], [[Australian dollar]], [[New Zealand dollar]], [[Swedish krona]], [[Singapore dollar]], and [[Hong Kong dollar]].<ref>{{cite book| last1=Menzies | first1=Jane|first2=Carson|last2=Block| title=Doing Business in China For Dummies| publisher=O'Reilly Online Learning | date=6 August 2007 | url=https://www.oreilly.com/library/view/doing-business-in/9780470049297/}}</ref><ref>{{Cite web|url=https://viewpoint.bnpparibas-am.com/the-us-fed-and-the-cost-of-the-hong-kong-dollar-peg/|title=The US Fed and the cost of the Hong Kong dollar peg|date=June 9, 2023|website=ViewPoint English}}</ref><ref>{{Cite web|url=https://www.wealthbriefing.com/html/article.php/Merk-Investments-Calls-Singapore-Dollar-A-Hard-Currency|title=Merk Investments Calls Singapore Dollar A Hard Currency|website=www.wealthbriefing.com|access-date=2024-10-31|archive-date=2024-12-12|archive-url=https://web.archive.org/web/20241212073436/https://www.wealthbriefing.com/html/article.php/Merk-Investments-Calls-Singapore-Dollar-A-Hard-Currency|url-status=live}}</ref> As times change, a currency that is considered weak at one time may become stronger, or vice versa;<ref>{{Cite web|url=https://www.irishexaminer.com/opinion/ourview/arid-40190238.html|title=Irish Examiner view: Sweden may scrap hard currency|date=December 14, 2020|website=Irish Examiner|access-date=October 31, 2024|archive-date=December 12, 2024|archive-url=https://web.archive.org/web/20241212081526/https://www.irishexaminer.com/opinion/ourview/arid-40190238.html|url-status=live}}</ref> the Japanese yen is a recent example.

Despite their countries' large economies, neither the [[Chinese renminbi (yuan)]] nor the [[Indian rupee]] are considered "hard" currencies.<ref>{{Cite web|url=https://www.investopedia.com/terms/h/hardcurrency.asp|title=Hard Currency: Definition, Examples, Vs. Soft Currency|website=Investopedia|access-date=2025-04-30|archive-date=2025-05-08|archive-url=https://web.archive.org/web/20250508124704/https://www.investopedia.com/terms/h/hardcurrency.asp|url-status=live}}</ref> The rupee is not widely used in international trade and is not [[Capital account convertibility|fully convertible on the capital account]].<ref>{{Cite web|url=https://www.investopedia.com/articles/forex/083115/pros-and-cons-fully-convertible-rupee.asp|title=The Pros and Cons of a Fully Convertible Rupee|website=Investopedia|access-date=2025-04-30|archive-date=2025-03-26|archive-url=https://web.archive.org/web/20250326181647/https://www.investopedia.com/articles/forex/083115/pros-and-cons-fully-convertible-rupee.asp|url-status=live}}</ref> In addition, India has a large [[trade deficit]], which exerts downward pressure on the currency.<ref>{{Cite web|url=https://economictimes.indiatimes.com/news/economy/policy/conditions-not-ripe-to-make-inr-a-hard-currency-gtri/articleshow/105327110.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cpps|title=Conditions not ripe to make INR a hard currency: GTRI|work=The Economic Times |date=November 19, 2023|via=The Economic Times - The Times of India}}</ref> The renminbi is not traded on world exchanges and the government places many controls on exchanging the currency.<ref>{{Cite web|url=https://www.oreilly.com/library/view/doing-business-in/9780470049297/9780470049297_ch10lev1sec1.html|title=Introducing China's Currency: The Tricky RMB - Doing Business in China For Dummies® [Book]|website=www.oreilly.com|access-date=2025-04-30|archive-date=2025-08-28|archive-url=https://web.archive.org/web/20250828024627/https://www.oreilly.com/library/view/doing-business-in/9780470049297/9780470049297_ch10lev1sec1.html|url-status=live}}</ref><ref>{{Cite web|url=https://valdaiclub.com/a/highlights/the-yuan-as-the-leading-foreign-currency-in-the-ru/|title=Analytics|first=Alexander|last=Losev|website=Valdai Club|access-date=2025-04-30|archive-date=2025-05-12|archive-url=https://web.archive.org/web/20250512094110/https://www.valdaiclub.com/a/highlights/the-yuan-as-the-leading-foreign-currency-in-the-ru/|url-status=live}}</ref>

One measure of hard currencies is how they are favored within the [[foreign-exchange reserves]] of countries:

{{Reserve currencies plot}}

== Turmoil ==
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 consequently been compelled to purchase dollars for their [[foreign exchange reserves]], price 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.

The [[Swiss franc]] (CHF) has long been considered a hard currency, and in fact was the last paper currency in the world to terminate its [[gold standard|convertibility to gold]] on 1 May 2000, following [[1999 Swiss referendums|a referendum]].<ref>{{cite news |url= https://www.nytimes.com/1999/04/19/world/swiss-narrowly-vote-to-drop-gold-standard.html |title= Swiss Narrowly Vote to Drop Gold Standard |newspaper= The New York Times |date= 19 April 1999 |access-date= 29 May 2024 |agency= Associated Press |archive-date= 3 April 2019 |archive-url= https://web.archive.org/web/20190403063357/https://www.nytimes.com/1999/04/19/world/swiss-narrowly-vote-to-drop-gold-standard.html |url-status= live }}</ref><ref>{{cite press release |url=http://www.efd.admin.ch/dokumentation/medieninformationen/archiv/00382/index.html?lang=en |title=Federal Law on Currency and Legal Tender to enter into force on 1 May 2000 |date=12 April 2000 |access-date=20 September 2012 |publisher=Efd.admin.ch |url-status=dead |archive-url=https://web.archive.org/web/20130517223258/http://www.efd.admin.ch/dokumentation/medieninformationen/archiv/00382/index.html?lang=en |archive-date=17 May 2013  }}</ref> In the summer of 2011, the European sovereign debt crisis led to rapid flows out of the euro and into the Swiss franc by those seeking hard currency, causing it to appreciate rapidly. On 6 September 2011, the [[Swiss National Bank]] announced that it would buy an "unlimited" number of euros to fix an exchange rate at 1.00&nbsp;EUR = 1.20&nbsp;CHF to protect its trade. This action temporarily eliminated the Swiss franc's hard currency advantage over the euro, but was abandoned in January 2015.

While the [[Japanese yen]] has been widely regarded as a hard currency, its sharp decline in value since 2022 has led to a loss of global confidence.<ref>{{Cite web |title=Yen's decline will inevitably affect confidence in Japan's economy |url=https://asia.nikkei.com/Opinion/Yen-s-decline-will-inevitably-affect-confidence-in-Japan-s-economy |access-date=2025-03-27 |website=Nikkei Asia |language=en-GB}}</ref><ref>{{Cite news |date=2022-09-02 |title=日本円が「ジャンク通貨」に？ ロシアや新興国通貨よりも価値下落：朝日新聞デジタル |url=https://www.asahi.com/articles/ASQ926KRTQ92ULFA00C.html?iref=ogimage_rek |trans-title=Will the Japanese yen become a "junk currency"? Decrease in value compared to Russian and emerging market currencies |access-date=2025-03-27 |website=朝日新聞デジタル |language=ja |archive-date=2023-11-01 |archive-url=https://web.archive.org/web/20231101220033/https://www.asahi.com/articles/ASQ926KRTQ92ULFA00C.html?iref=ogimage_rek |url-status=live }}</ref><ref>{{Cite web |date=2024-04-24 |title=「円弱」時代の処方箋 国内生産・インバウンド・外貨投資に活路 編集委員 小栗太 |url=https://www.nikkei.com/article/DGXZQOCD223C60S4A320C2000000/ |access-date=2024-05-29 |website=日本経済新聞 |language=ja |archive-date=2024-05-28 |archive-url=https://web.archive.org/web/20240528221229/https://www.nikkei.com/article/DGXZQOCD223C60S4A320C2000000/ |url-status=live }}</ref> Japanese economist ''Izuru Katō'' satirically warns that the yen may effectively turned into a "junk currency".<ref>{{Cite news |date=2022-08-25 |title=円安で日本円は"ジャンク通貨"になった 海外両替所に日本円の表示がないことも |trans-title=The depreciation of the yen has turned the Japanese yen into a "junk currency". Overseas currency exchange offices may not display Japanese yen. |url=https://www.moneypost.jp/940387 |access-date=2024-05-29 |website=マネーポストWEB |language=ja |archive-date=2023-06-08 |archive-url=https://web.archive.org/web/20230608203139/https://www.moneypost.jp/940387 |url-status=live }}</ref> The impact of the recent decline of yen has also led to a series of moves by even Japanese companies to cease trading in Japanese yen.<ref>{{Cite web |date=2024-06-05 |title=三井海洋開発など、決算書の円表記やめます 拠点も資金も日本に戻らず 円の警告・国富を考える（3） |url=https://www.nikkei.com/article/DGXZQOTG271870X20C24A5000000/ |access-date=2024-09-01 |website=日本経済新聞 |language=ja |archive-date=2024-08-31 |archive-url=https://web.archive.org/web/20240831191133/https://www.nikkei.com/article/DGXZQOTG271870X20C24A5000000/ |url-status=live }}</ref>

The [[Freiwirtschaft]] economist [[Silvio Gesell]] criticized hard currency and argued that it is responsible for enabling recessions. In his book, ''[[The Natural Economic Order]]'', Gesell wrote "The power of money to affect exchanges, its technical quality from the mercantile standpoint, is in inverse proportion to its technical quality from the banking standpoint."<ref name="NEO-part-3-chap-10">{{Cite book |last=Gesell |first=Silvio |title=Die natürliche Wirtschaftsordnung durch Freiland und Freigeld |trans-title=The Natural Economic Order/Part III/Chapter 10: The Supply of Money |date=1916 |location=Bern, Switzerland |translator-last=Pye |translator-first=Philip |via=The Anarchist Library |url=https://theanarchistlibrary.org/library/silvio-gesell-the-natural-economic-order#toc43 |archive-url=https://web.archive.org/web/20250317140424/https://theanarchistlibrary.org/library/silvio-gesell-the-natural-economic-order |archive-date=17 March 2025 |access-date=30 April 2025 |df=dmy-all |isbn=9781610330442}}</ref> Gesell believed that since gold and other commodity backed money are great for storing wealth, such money is therefore terrible for functioning as a [[medium of exchange]], which he viewed to be the only legitimate function of money. In his view, "Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether."<ref name="NEO-part-4-chap-1">{{Cite book |last=Gesell |first=Silvio |title=Die natürliche Wirtschaftsordnung durch Freiland und Freigeld |trans-title=The Natural Economic Order/Part IV/Chapter 1: Free-Money |date=1916 |location=Bern, Switzerland |translator-last=Pye |translator-first=Philip |via=The Anarchist Library |url=https://theanarchistlibrary.org/library/silvio-gesell-the-natural-economic-order#toc51 |archive-url=https://web.archive.org/web/20250317140424/https://theanarchistlibrary.org/library/silvio-gesell-the-natural-economic-order |archive-date=17 March 2025 |access-date=30 April 2025 |df=dmy-all |isbn=9781610330442}}</ref> Gesell proposed that [[demurrage currency]] would solve the problems caused by hard currency.

American cigarettes were hard currency among civilians in [[Allied-occupied Germany]] after the end of World War II, because of the collapse in value of the [[Reichsmark]].<ref name="ziemke1975">{{Cite book |last=Ziemke |first=Earl F. |url=http://www.history.army.mil/books/wwii/Occ-GY/index.htm |title=The US Army in the Occupation of Germany, 1944-1946 |publisher=Center of Military History, United States Army |year=1975 |location=Washington DC |pages=335–336, 349 |lccn=75-619027 |archive-url=https://web.archive.org/web/20071213200328/http://www.history.army.mil/books/wwii/Occ-GY/index.htm |archive-date=2007-12-13}}</ref><ref name="fuhrer20230620">{{Cite news |last=Führer |first=Armin |date=2023-06-20 |title=Währungsreform 1948: Vater der D-Mark war ein junger, jüdischer Amerikaner, nicht Ludwig Erhard |url=https://www.spiegel.de/geschichte/waehrungsreform-1948-wie-edward-a-tenenbaum-die-d-mark-erfand-a-7521a7af-bbf3-4e5e-901c-0c3dcd0f9d17 |archive-url=https://archive.today/20230620202920/https://www.spiegel.de/geschichte/waehrungsreform-1948-wie-edward-a-tenenbaum-die-d-mark-erfand-a-7521a7af-bbf3-4e5e-901c-0c3dcd0f9d17 |archive-date=2023-06-20 |access-date=2025-07-17 |work=Der Spiegel |language=de |issn=2195-1349}}</ref>

== Demand ==
Investors as well as ordinary people generally prefer hard currencies to soft currencies at times of increased inflation (or, more precisely, times of increased inflation differentials between countries), at times of heightened political or military risk, or when they feel that one or more government-imposed [[exchange rate]]s are unrealistic.  There may be regulatory reasons for preferring to invest outside one's home currency, e.g. the local currency may be subject to [[capital control]]s which makes it difficult to spend it outside the host nation.

For example, during the [[Cold War]], the [[Soviet ruble|ruble]] in the [[Soviet Union]] was not a hard currency because it could not be easily spent outside the Soviet Union and because the exchange rates were fixed at artificially high levels for persons with hard currency, such as Western tourists.  (The Soviet government also imposed severe limits on how many rubles could be exchanged by Soviet citizens for hard currencies.)  After the fall of the Soviet Union in December 1991, the ruble depreciated rapidly, while the [[purchasing power]] of the US dollar was more stable, making it a harder currency than the ruble. A tourist could get 200 rubles per US dollar in June 1992, and 500 ruble per dollar in November 1992.

In some economies, which may be either [[planned economies]] or [[market economies]] using a soft currency, there are special stores that accept only hard currency.  Examples have included [[Torgsin]] and [[Beryozka (Russian retail store)|Beryozka]] stores in the former [[Soviet Union]], [[Tuzex]] stores in former [[Socialist Czechoslovakia|Czechoslovakia]], [[Intershop]]s in former [[East Germany]], [[Pewex]] and [[Baltona]] in [[Polish People's Republic|Poland]], [[Comturist]] in [[Socialist Republic of Romania|Romania]], [[Corecom]] in [[People's Republic of Bulgaria|Bulgaria]], [[Dollar store (Cuba)|Dollar stores]] in [[Cuba]], or [[Friendship store]]s in [[China]] in the early 1990s. These stores offer a wider variety of goods{{snd}} many of which are scarce or imported{{snd}} than standard stores.{{Citation needed|date=October 2011}}

== Mixed currencies ==
Because hard currencies may be subject to legal restrictions, the desire for transactions in hard currency may lead to a [[black market]].  In some cases, a central bank may attempt to increase confidence in the local currency by [[Fixed exchange rate system|pegging it against a hard currency]], as is this case with the [[Hong Kong dollar]] or the [[Bosnia and Herzegovina convertible mark]].  This may lead to problems if [[economic]] conditions force the government to break the currency peg (and either appreciate or depreciate sharply) as occurred in the [[1998–2002 Argentine great depression]].

In some cases, an economy may choose to abandon local currency altogether and adopt another country's currency as [[legal tender]]. Examples include the adoption of the US dollar in [[Panama]], [[Ecuador]], [[El Salvador]] and [[Zimbabwe]] and the adoption of the [[German mark]] and later the [[euro]] in [[Serbia]] and [[Montenegro]].

== See also ==
{{Portal|Money}}
{{div col|colwidth=30em}}
* [[Black Friday (1869)]] – Also referred to as the ''Gold Panic of 1869''
* {{anl|Commodity currency}}
* {{anl|Currency strength}}
* {{anl|Fiat money}}
* {{anl|Gold reserve}}
* {{anl|Gold standard}}
* {{anl|Private currency}}
* {{anl|Representative money}}
* {{anl|Reserve currency}}
* {{anl|Silver standard}}
{{div col end}}

== References ==
{{reflist|30em}}

{{Hard currency shops in socialist countries}}

{{DEFAULTSORT:Hard Currency}}
[[Category:Currency]]
[[Category:Monetary hegemony]]
[[Category:Progressive Era in the United States]]