Q. Consider the following statements regarding hard currency:
1.It has a high level of liquidity.
2.Indian Rupee, Japanese Yen and American Dollar are the examples of hard currency.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A

Explanation: Hard Currency is the international currency in which the highest faith is shown and is needed by every economy. The strongest currency of the world is one which has a high level of liquidity.

  • Basically, the economy with the highest as well as highly diversified exports that are compulsive imports for other countries (as of high-level technology, defence products, life saving medicines and petroleum products) will also create high demand for its currency in the world and become the hard currency.
  • It is always scarce. Upto the Second World War, the best hard currency was the Pound Sterling (£) of the UK, but soon it was replaced by the US Dollar.
  • Some of the best hard currencies of the world today are the US Dollar, the Euro(€), Japanese Yen (¥) and the UK Sterling Pound (£).
  • Meanwhile, by late 2015, the IMF allowed the SDR to be denominated in the chinese ‘Yaan’–paving the way for a new hard currency to be implemented in 2016.

Source: Ramesh Singh