Demand
Investors as well as ordinary people generally prefer hard currencies to soft currencies at times of increased inflation (or more precisely increased inflation differentials between countries), at times of heightened political or military risk, or when they feel that one or more government-imposed exchange rates are unrealistic. There may be regulatory reasons for preferring to invest outside one's home currency, e.g. the local currency may be subject to capital controls which makes it difficult to spend it outside the host nation.
For example, during the Cold War, the ruble in the Soviet Union was not a hard currency because it could not be easily spent outside the Soviet Union and because the exchange rates were fixed at artificially high levels for persons with hard currency, such as Western tourists. (The Soviet government also imposed severe limits on how many rubles could be exchanged by Soviet citizens for hard currencies.) After the fall of the Soviet Union in December 1991, the ruble depreciated rapidly, while the purchasing power of the U.S. dollar was more stable, making it a harder currency than the ruble. A tourist could get 200 rubles per U.S. dollar in June 1992, and 500 rubles per USD in November 1992.
In some economies, which may be either planned economies or market economies using a soft currency, there are special stores that accept only hard currency. Examples have included Tuzex stores in the former Czechoslovakia, Intershops in East Germany or Friendship stores in the People's Republic of China in the early 1990s. These stores offer a wider variety of goods — many of which are scarce or imported — than standard stores.
Read more about this topic: Hard Currency
Famous quotes containing the word demand:
“You are right to demand that an artist engage his work consciously, but you confuse two different things: solving the problem and correctly posing the question.”
—Anton Pavlovich Chekhov (1860–1904)
“The English masses are lovable: they are kind, decent, tolerant, practical and not stupid. The tragedy is that there are too many of them, and that they are aimless, having outgrown the servile functions for which they were encouraged to multiply. One day these huge crowds will have to seize power because there will be nothing else for them to do, and yet they neither demand power nor are ready to make use of it; they will learn only to be bored in a new way.”
—Cyril Connolly (1903–1974)
“We now demand the light artillery of the intellect; we need the curt, the condensed, the pointed, the readily diffused—in place of the verbose, the detailed, the voluminous, the inaccessible. On the other hand, the lightness of the artillery should not degenerate into pop-gunnery—by which term we may designate the character of the greater portion of the newspaper press—their sole legitimate object being the discussion of ephemeral matters in an ephemeral manner.”
—Edgar Allan Poe (1809–1845)