Also found in: Dictionary
Related to soft currency: hard currency
, Fiat currency
of a country that is expected to drop
in value relative to other currencies.
that fluctuates in value
frequently. Soft currencies are generally issued by governments that are less stable and/or have weaker economies
than stronger currencies. As such, most soft currencies come from countries in the developing world
. Central banks
rarely hold reserves
of foreign soft currencies as they do little or nothing to stabilize the local currency. A soft currency is also called a weak currency. See also: Strong currency
soft currency a FOREIGN CURRENCY that is in weak demand but in abundant supply on the FOREIGN EXCHANGE MARKET. Soft currency status is usually associated with an economically weak country that is running a large deficit in its BALANCE OF PAYMENTS; the supply of the currency is high to finance the purchase of imports, but demand for the currency is relatively weak because the amount of it being required for the purchase of exports is much lower. Under a FLOATING EXCHANGE RATE SYSTEM, however, the demand for, and supply of, the currency should be, in theory, brought into balance by a DEPRECIATION 1 in its EXCHANGE-RATE value. Compare HARD CURRENCY.