Q. With reference to the terms used in the foreign exchange market, consider the following statements:
1.A hard currency is typically issued by countries with high and diversified exports that are critical for other nations.
2.A soft currency refers to the currency of an economy that is widely accepted and scarce in the global forex market.
Which of the statements given above is/are correct?
Answer: A
Notes:
Explanation:
- A hard currency is one with high global credibility, usually from economies with strong, diversified exports like tech, defence, and critical goods. Its demand is high and it is often scarce in global markets.
- A soft currency is the opposite of hard currency. It is easily available in domestic forex markets and is not globally scarce or highly demanded. For example, the Indian Rupee is a soft currency in India.
Source- TMH Indian Economy by Ramesh Singh
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