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Definition

A first-world currency which is relatively stable and serves as a good store of value. The hard currencies of the world include the US dollar, the euro, the British pound, the Japanese yen, the Canadian dollar and the Australian dollar. Hard currencies are internationally traded and used for many international transactions. This compares with third-world or emerging market currencies like the Brazilian real, the Russian ruble, the Turkish lira, the Mexican peso or the South African rand. These currencies are much more volatile and their usage is mostly restricted to their country of origin. International investors are attracted to emerging markets because the returns to be had there are much higher than in first world countries. For example, South African long bonds have a yield which is as much as 6% above the local inflation rate - which should be compared with the 10-year US treasury bill which in April 2022 offered a negative yield after inflation. In April 2022, the yield on the US 10-year T-Bill was 2,7% while their consumer price index (CPI) inflation rate was 7,9%.

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