Hard and Soft Currency
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On the top of hard and soft currencies:
- How are they utilised in international financing?
- Outline their importance in managing risks
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Solution Summary
An explanation on how hard and soft currencies are used in international financing.
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Running head: Hard and Soft Currency
Hard and Soft Currency Paper
Abstract
In this era of globalization the currency management is a critical issue for both the organizations and issue. Effective currency management can lead to strengthening of the economy, controlled inflation and stable economic policies. One of the techniques of currency management is identifying about different type of currencies such as Hard currency and soft currency and bringing stability in the foreign exchange management of the nation.
Introduction
The foreign exchange market is a dynamic market and is not uniform through out through out the world. It may be regulated or semi regulated or totally free. Hence the currency management has gained importance. This is more visible now due to rapid globalization and increasing volatility in the external environment. There can be two types of currency world wide hard currency and soft currency. Understanding the dynamics of each of these will help us in effectively managing the foreign exchange scenario.
Hard and soft currencies
Currencies are needed to conduct international transactions like import and export of goods and services, to make foreign investment or to take foreign loan. But there is risk also associated with the currency as there is change in the rate. Thus Risk is the uncertainty that you may not earn your expected return on your investments. Nations and organizations must constantly assess the external environments they are already operating in as well as the ones they are considering investing in. One of the most important international risks, which nation or an organization faces, is exchange rate or currency risk. Due to rapid ...
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