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Most likely derived from Romaniposh(“half”), either because posh-kooroona(“half a crown”) (originally a substantial sum of money) was used metaphorically for anything pricey or upper-class, or because posh-houri(“half-penny”) came to refer to money generally.
A period slang dictionary defines "posh" as a term used by thieves for "money : generic, but specifically, a halfpenny or other small coin".[1] An example is given from James Payn's The Eavesdropper (1888): "They used such funny terms: 'brads,' and 'dibbs,' and 'mopusses,' and 'posh' ... at last it was borne in upon me that they were talking about money."[2]
Evidence exists for a slang sense from the 1890s meaning dandy, which is quite possibly related.[3]
A popular folk etymology holds that the term is an acronym for "port out, starboard home",[4] describing the cooler, north-facing cabins taken by the most aristocratic or rich passengers travelling from Britain to India and back. However, there is no evidence for this claim.[5]
1919: "Well, it ain't one of the classic events. It were run over there." Docker jerked a thumb vaguely in the direction of France. "At a 'Concours Hippique,' which is posh for 'Race Meeting.' — Punch, or the London Charivari, Vol. 156, June 18, 1919
Ačaṙean, Hračʻeay (1979) “փոշի”, in Hayerēn armatakan baṙaran [Armenian Etymological Dictionary] (in Armenian), 2nd edition, a reprint of the original 1926–1935 seven-volume edition, volume IV, Yerevan: University Press, page 517a
Vaillant, Jean-Alexandre (1868) “pos'”, in Grammaire, dialogues et vocabulaire de la langue des Bohémiens ou Cigains (in French), Paris: Maisonneuve, page 123a