Legal tender is issued by countries around the world, but just as countries vary in stability, so do the currencies they issue. The terms "hard" and "soft" are used to describe the relative stability of currencies. Hard currencies are those which are seen as reliable and soft currencies as less dependable.
Hard and Soft
Hard currencies are stable and unlikely to lose value quickly. According to Gary Shoup, the author of International Guide to Foreign Currency Management, the U.S. dollar, Canadian dollar and Japanese yen are all examples of hard currencies. Hard currencies can be easily converted to foreign currencies. In contrast, soft currencies may depreciate in value rapidly and they are difficult to convert into foreign currencies.
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