what allows a currency to qualify as hard it is expected to remain relatively stable through a short period of time and to be highly liquid in the foreign exchange or forex fx market in which currencies are traded the forex market is the largest most liquid market in the world with average traded values of trillions of dollars per day 1 it includes all of the currencies in the world 
forex transactions take place on either a spot or forward basis and are executed over the counter and around the clock there is no centralized market for forex transactions the largest foreign exchange markets are located in major financial centers such as london new york singapore tokyo frankfurt hong kong and sydney 2 the hard currency must have a stable value the value of a currency is mostly based on economic fundamentals such as gross domestic product gdp and employment the international strength of the u s dollar is reflective of america s gdp which as of the end of 2019 stood first in the world at 21 43 trillion china and india had the second and fifth respectively ranked gdps in the world but neither the chinese yuan nor the indian rupee is considered a hard currency 3 this helps explain how central bank policies and stability in a country s money supply also factor into exchange rates the u s dollar is considered to be the world s foreign reserve currency which is the reason it is used in 88 of international trade transactions 4 example of a hard loanan example of a hard loan would be a loan agreement between a brazilian company and an argentinean bank in which the debt is to be paid in u s dollars is a type of hard loan because u s dollars are considered to be hard currency and more stable than either the brazilian real brl or the argentine peso arp 