WHAT IS A 'Hard Loan'

A hard loan is a foreign loan that must be paid in hard currency, or the currency of a nation that has stability and a reputation abroad for economic strength.


A hard loan is a type of loan between a lender and borrower in two different counties and is denominated by hard currency. Hard currency is a monetary system that is widely accepted around the world as a form of payment for goods and services. It usually comes from a country that has a strong economic and political standing. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market.

For example, a loan agreement between a Brazilian company and an Argentinean company where 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 Brazilian or Argentinean dollars. A hard loan substantially reduces the risk that would exist if the loan were denominated in less-stable currencies.

Hard Currency

The value of a currency is mostly based off of 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 2016, stood first in the world at $18.57 trillion. China and India had the second and seventh, respectively, ranked GDPs in the world, but neither the Chinese yuan nor the Indian rupee is considered a hard currency. 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 70 percent of international trade transactions.

One measure of a hard currency is its liquidity in the forex or foreign exchange market. FX is the market in which currencies are traded, and the forex market is the largest, most liquid market in the world, with average traded values that of trillions of dollars per day. The FX market includes all of the currencies in the world. Forex  transactions take place on either a spot or a 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 like London, New York, Singapore, Tokyo, Frankfurt, Hong Kong and Sydney.

  1. Hard Currency

    A hard currency is a system of money that generally comes from ...
  2. Hard Money Loan

    A hard money loans is a short-term loan backed by the value of ...
  3. Key Currency

    A key currency used is money issued by stable, developed country ...
  4. Managed Currency

    A managed currency is one whose monetary exchange rate is affected ...
  5. Hard Money

    Hard money is an ongoing funding stream versus a one-time grant ...
  6. International Currency Markets

    The International Currency Market is a market in which participants ...
Related Articles
  1. Trading

    Forex market: Who trades currency and why

    The forex market has a lot of unique attributes that may come as a surprise for new traders. Learn more about who trades foreign currencies and why.
  2. Trading

    6 top-traded currencies and why they're so popular

    Every currency has specific features that affect its underlying value and price movements in the forex market. Learn why these currencies are especially popular for trading.
  3. Trading

    How Equities Affect the FX Market

    By studying the stock market, it may be possible to predict the movement of foreign currency. Learn how it's done and the limitations of this approach.
  4. Investing

    Protect Your Foreign Investments From Currency Risk

    Hedging against currency risk can add a level of safety to your offshore investments. Find out more about currency risk analysis in global investing.
  5. Trading

    Currency fluctuations: How they effect the economy

    Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. Read on for what effects these changes can have.
  6. Insights

    An Introduction to Government Loans

    Government loans provide more benefits than private loans are available in many areas, including business, education, housing, disaster relief and more.
  7. Trading

    Forex Trading: A Beginner’s Guide

    As businesses continue to expand to markets all over the globe, the need to complete transactions in other countries’ currencies is only going to grow.
  8. Personal Finance

    Should You Take Out A Personal Loan to Family?

    Find out how loaning cash to family or friends can put a strain on your relationship and your bank account. Learn how to properly make family loans safe.
  1. What is foreign exchange?

    Foreign exchange is the conversion of a country's currency into another. In a free economy, a country's currency is valued ... Read Answer >>
  2. What are key economic factors that can cause currency depreciation in a country?

    Read about the causes of currency devaluation, and find out how to differentiate between relative and absolute currency devaluation. Read Answer >>
  3. What is the difference between trading currency futures and spot FX?

    The main difference between currency futures and spot FX is when the physical exchange of the currency pair takes place. Read Answer >>
Trading Center