Hard vs Soft Currencies

Hard and soft currencies
January 10, 2012
University Of Phoenix
      Martha Alcala

Hard and soft currencies
Global financing and exchange rates are major topics when considering a venturing business abroad. In the proceeding I will explain in detail what hard and soft currencies are. I will explain the reasoning for the fluctuating currencies. Lastly, I will explain hard and soft currencies importance in managing risks.
Hard currency is usually from a highly industrialized country that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market. Another criterion for a hard currency is that the currency must come from a politically and economically stable country. The U.S. dollar and the British pound are good examples of hard currencies (Investopedia, 2011).
Hard currency means that the currency is strong. The terms strong and weak, rising and falling are terms used in foreign exchange which is referred to as forex. Rising and falling, strength and weakness are relative in change in position from a previous level.   A strong dollar will buy more units of a foreign currency than previously.
One result of a stronger dollar is that the prices of foreign goods and services drop for U.S. consumers. This will allow Americans to take the long vacation to another country, or buy a foreign car that used to be too expensive. U.S. consumers’ benefit from a strong dollar, but U.S. exporters is hurt. A strong dollar means that it takes more from a foreign currency to buy U.S. dollars. U.S. goods and services become more expensive for foreign consumers who, as a result, tend to buy fewer U.S. products.   It takes more of a foreign currency to purchase a strong dollars products priced in dollars are more expensive when sold overseas (Chicago Fed, 2008).
Soft currency is another name for weak...