A soft currency and a strong currency are two terms used to describe the relative strength and stability of a country's currency in the foreign exchange market.

A soft currency, also known as a weak currency, refers to a currency that has a lower value or purchasing power compared to other currencies. Soft currencies are typically influenced by factors such as high inflation rates, economic instability, political uncertainty, or a lack of investor confidence. Holding a soft currency can present risks, as it may be prone to depreciation, making imports more expensive and reducing the currency's value against other currencies.

In contrast, a strong currency is one that has a higher value or purchasing power compared to other currencies. Strong currencies are often associated with stable economies, low inflation rates, strong fiscal policies, and high levels of investor confidence. Holding a strong currency can provide advantages, such as increased purchasing power, lower import costs, and favorable exchange rates for international trade.

The strength or weakness of a currency impacts various aspects of an economy, including trade balances, foreign investments, tourism, and domestic inflation. Central banks and governments closely monitor and manage their currency to ensure stability and mitigate the risks associated with a soft currency.