Soft currency.
Almost all national bank reserves are held in hard global currencies, but this term is often used interchangeably with its opposite—soft currency. Understanding this concept will help you better understand other forex terms.
A soft currency is a weak monetary unit, typically with low liquidity and virtually zero collateral.
These currencies are poorly valued on the global currency market and are only circulated within their own country.
• Unstable exchange rate – this currency fluctuates in value against other currencies almost instantly. Price changes are generally downward. Within a month, this currency can lose more than one hundred percent of its value against major world currencies.
• Weak economy of the issuer country – soft currencies most often belong to the economies of developing countries with high inflation and an unstable political situation within the country.
• Low liquidity – such currency is difficult to sell on the exchange, it is practically not in demand among buyers.
• Inconvertibility - soft currency is practically impossible to sell or buy in other countries; it is only circulated in a limited area.
A soft currency isn't a generic indicator of monetary units. After an economy strengthens and a positive balance of payments emerges, any currency can change its status and become a hard currency. This has happened with many currencies after the governments of the issuing countries took effective measures to improve the economic and political situation in their countries.
However, sometimes the opposite trend is also possible as a result of armed conflicts, defaults and natural disasters.
You can find current exchange rates for hard currencies here Forex Quotes .
