A soft currency is a type of currency that is issued by a country that is not financially strong. Many times, this type of currency will fluctuate based on the slightest circumstances in the country where the currency is tied. This type of currency is also sometimes referred to as a "weak currency."

Soft currency and the Forex Market

If you are investing in the Forex market, you will not find any soft currencies with most Forex dealers. Forex dealers will stay away from this type of currency because it is extremely volatile and can be very unpredictable for investors. In most cases, investors will lose significant amounts of money when trading this type of currency.

Many times, the governments of these developing countries will also set extremely high exchange rates for their currencies that are not in line with their true value. This makes them difficult to work with for brokers which is part of reason that they are frequently left out of the available currencies with Forex brokers. 

As a trader, you should be careful about soft currencies. Instead, consider focusing on currencies that are produced by some of the economic powers of the world.


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