Hard currency
Hard currency (also hard or strong currency ; English hard currency ) is a currency that is fully convertible, is considered to be particularly stable and meets a wide market breadth at any time on the foreign exchange market . The opposite is the soft currency .
General
Accordingly, the hard currency country is a state whose currency is internationally regarded as a hard currency. Hard currency countries are preferred investment countries. Their economic policy is characterized by the striving for monetary stability . Hard currencies are popular for denominations in contracts or securities . Typical hard currencies are US dollars , euros , Swiss francs or yen . Until the introduction of the euro as book money in January 1999 , the German mark was also considered a hard currency internationally .
Soft currency
As a soft currency ( English soft currency ) and vice versa, a currency that is limited or even non-convertible, high volatility has and in the currency market to a significant market problem is true. It is subject to a long-term risk of devaluation , particularly due to high inflation ( hyperinflation ) and political uncertainties (such as frequent changes of government ) . Soft currency countries are predominantly the developing and emerging countries .
economic aspects
Hard currencies are always key currencies that are used to a significant extent as transaction , denomination and reserve currency in the global economy and in international payment transactions across currency areas, although payment in the domestic currency would be possible. In particular, potential creditors of soft currencies choose hard currencies for their claims , because otherwise they would have to reckon with a devaluation trend for the soft currency and therefore - without a hedging transaction - with exchange rate losses . If invoices are still made in soft currencies, higher transaction costs are the result because of the necessary hedging transactions . Soft currencies are part of the country risk and, in the long term, are also subject to a transfer stop risk or moratorium risk . That is why the debts of developing countries are to a large extent denominated in hard currencies. In contract negotiations and in bond terms , the bargaining power decides whether a hard currency is selected.
The vast billing of oil in US dollars ( petrodollars ) gives liabilities of the Federal Reserve over the OPEC -Staaten to an enormous extent, because this dollar foreign exchange flow to what policy the United States is not always agreeable. This invoicing happens without the affected US central bank being able to influence it. From this it can generally be deduced that all countries with hard and key currencies cannot influence the selected denominations, but that these nevertheless affect their foreign exchange balance as soon as a payment flow is triggered. Denominations lead to the fact that the book money ( foreign exchange ) increases through money creation in the selected hard currency without the hard currency country being involved in the underlying transaction .
Hardness of a currency and currency coverage
There is no connection with currency coverage (e.g. currency reserves or gold standard ). Covered currencies can also be subject to inflation (see price revolution ) and do not necessarily have to be hard currencies . However, an exchange rate arrangement , an exchange rate system or a currency board have traditionally been regarded as a suitable instrument for improving the stability of the external value of a currency.
The euro is a hard currency. This was not the same for its predecessor currencies. While the German mark and the Austrian shilling were considered hard currencies after the Second World War, the Italian lira and Spanish peseta were soft currencies for long periods of time, which were subject to devaluation against the German mark. Historically, the hardest currencies include the Swiss franc and the Japanese yen . Currencies such as the US dollar and the French franc are roughly in the middle if you look at the time since around 1960.
| currency | 1 DEM = December 18, 1963 |
1 DEM = December 18, 2013 |
change |
|---|---|---|---|
| Swiss franc | 1.09 | 0.62 | −43.1% |
| Japanese yen | 90.60 | 72.40 | −20.1% |
| Austrian schilling | 6.50 | 7.04 | + 8.3% |
| Dutch guilder | 0.91 | 1.13 | + 24.2% |
| Belgian franc | 12.54 | 20.63 | + 64.5% |
| Danish crown | 1.74 | 3.81 | +119.0% |
| Norwegian krone | 1.80 | 4.33 | +140.6% |
| Maltese lira | 0.09 | 0.22 | + 144.4% |
| French Franc | 1.23 | 3.35 | + 172.4% |
| Canadian dollar | 0.27 | 0.74 | + 174.1% |
| U.S. dollar | 0.25 | 0.70 | +180.0% |
| Cyprus pound | 0.09 | 0.30 | + 233.3% |
| Swedish crown | 1.31 | 4.62 | + 252.7% |
| Australian dollar | 0.22 | 0.79 | + 259.1% |
| Finnish mark | 0.81 | 3.04 | +275.3% |
| Irish pound | 0.09 | 0.40 | + 344.4% |
| British pound | 0.09 | 0.43 | +377.8% |
| Spanish peseta | 15.06 | 85.07 | +464.9% |
| Italian lira | 156.60 | 990.00 | +532.2% |
| Portuguese escudo | 7.21 | 102.50 | +1,321.6% |
| Greek drachma | 7.55 | 174.22 | +2,207.5% |
| Turkish Lira (old) | 2.30 | 1,430,421.00 | +62,192,217.4% |
If you include the period between 1914 and 1950, many later hard currencies such as the German and Austrian, but also the French and Japanese lost their value completely (in Germany around 1924 and again in 1948), while other currencies showed a steady decline in value , but faced runaway inflation. In France, for example, the costs of World War II were "inflated away" in one fell swoop in the immediate post-war period, followed by a phase of relative currency stability, while in Great Britain this process took place over several decades of increased inflation rates. Owners of assets can usually adapt better to the latter, so that the assets are less affected than in the event of an abrupt devaluation. The Swiss franc stands out as the only currency that has been stable for over 100 years, as does the US dollar (by a considerable margin) (before the First World War, around 5.20 Swiss francs had to be paid for one US dollar, while in 2016 only 1 franc is left).
In terms of global foreign exchange reserves , the most important reserve currencies have the following proportions (4th quarter of the year):
| currency | Share in% 2002 |
Share in% 2007 |
Share in% 2012 |
Share in% 2019 |
|---|---|---|---|---|
| USD | 66.5 | 64.1 | 61.2 | 60.9 |
| EUR | 24.2 | 26.3 | 25.0 | 20.6 |
| JPY | 4.5 | 2.9 | 4.0 | 5.7 |
| GBP | 2.9 | 4.7 | 4.0 | 4.6 |
| CHF | 0.4 | 0.2 | 0.3 | 0.2 |
The share of the US dollar in global reserve currencies has steadily declined in favor of the euro. Its share increased continuously, only suffered setbacks after the financial crisis from 2007 and after the euro crisis from 2010. During this time the pound and the yen were able to increase their shares.
See also
Individual evidence
- ↑ Wolfgang Grill / Ludwig Gramlich / Roland Eller (eds.), Gabler Bank Lexikon , 1995, p. 820
- ↑ Wolfgang Grill / Ludwig Gramlich / Roland Eller (eds.), Gabler Bank Lexikon , Volume 1 (A – K), 11th edition, 1995, p. 820, ISBN 3-409-46104-3
- ↑ Gerd Kommer, Sovereign investing with index funds and ETFs , 2015, p. 245
- ↑ Wolfgang Grill / Ludwig Gramlich / Roland Eller (eds.), Gabler Bank Lexikon , Volume 2 (L – Z), 11th edition, 1995, p. 1671
- ↑ Georg Schlichting, The Debt Problem of the Third World , 1997, p. 257
- ↑ Springer Fachmedien Wiesbaden (ed.), Compact Lexicon Economic Theory , 2013, p. 304
- ↑ Exchange rate database at fxtop.com
- ↑ IMF, World Curreny Compostion of Official Foreign Exchange Reserves , shares of Allocated Reserves , 2020