Currency Convertibility
The ease with which a country's currency can be converted into gold or another currency. Convertibility is extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the domestic currency. Investopedia Says:
Government restrictions can often result in a currency with a low convertibility. For example, a government with low reserves of hard foreign currency often restrict currency convertibility because the government would not be in a position to intervene in the foreign exchange market (i.e. revalue, devalue) to support their own currency if and when necessary. Related Terms:
Currency
Currency Swap
Devaluation
Dual Exchange Rate
Exchange Rate
Foreign Currency Effects
Forex - FX
Hard Currency
Revaluation
Soft Currency |