Different Types of Currency Explained In-Detail

Types of Currency
Different Types of Currency

HARD CURRENCY

Hard Currency is the international currency in which the highest faith is shown and is needed by every economy.You can say it is basically the strongest currency of the world, which has the highest level of liquidity.

Basically, the economy with the highest and highly diversifies exports, that are compulsive imports for other countries, which will also create high demand for its currency in the world and become the Hard Currency. it is always scarce.

Upto the WW-II, the best Hard currency was the Pound Sterling of the UK, but soon replaced by US Dollar. Some of the best Hard currencies of the world today are the:

US Dollar, The Euro, Japanese Yen, and the UK Pound Sterling.

SOFT CURRENCY

Soft currency you can say is just the opposite of Hard currency. It is the currency that is easily available in any economy in its Forex market.

For example, Indian Rupee is the Soft currency in the Indian Forex market.

HOT CURRENCY

It is the term for the Forex market and is the temporary name for any Hard currency. If any Hard currency is exiting any economy at a fast pace for the time, the Hard currency is said to be Hot currency.

For example, in the case of SE Asian crisis, the US Dollar become hot.

HEATED CURRENCY

This term is used to denote the domestic currency which is under pressure (heat) of depreciation due to a hard currency’s high tendency of exiting the economy. Also known as currency under heat or under hammering.

CHEAP CURRENCY

This term was being first used by J.M. Keynes. When a government starts re-purchasing its bonds before their maturities, the flow of money in the money will increase, as the supply of money will increase by this action of government, the money will become cheap, and hence it will be called Cheap Money or Cheap currency.

This is nothing but just opposite of Cheap money. In this, the government issues bonds, the flow money increases from public to the government, supply of money in the market decreases, and hence the money become dear to the people, that’s why it is called, Dear Money or Dear currency.

REFERENCE: Indian Economy by Ramesh Singh

Leave a Comment