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What is Foreign Exchange Controls and how it Effects?

  • July 2014
  • Posted By Ninoslav

Trading or currency market is sometimes beneficial to people for a good stability in the market. But there are some rules of government for an individual country on sell and purchase of the currencies and these are known as Foreign Exchange Controls.

What are the different controls of the country?
Some countries follow the restrictions which are very strict to follow and these countries are known as “article 14 countries”. There are many countries in the world where many restrictions are legally followed by the individuals. Hence, it is necessary to know about those rules and restrictions which are generated by the government. Some of them are as follows-

  • Use of foreign currency is banned in some countries.
  • Locals are being banned from possessing foreign currency.
  • Exchange rates are fixed.
  • Sometimes restrictions are done for a particular amount, currency as how much currency you need to import or export.

How these controls or restrictions are getting affected?
This is good to follow some specific rule, but sometimes these effects go in a wrong direction and black market gets spread for exchanging currencies. In this, weaker currencies are changed to get stronger currencies. The rate of exchange for a foreign currency is very much higher than the rate set by the government.

Hence, sometimes according to the rules and restrictions it is good to improve the value of a country’s own currency, but to get a good and strong stability, investors exchange them illegally. They do not follow Foreign Exchange Controls by their country, even they know about “what is the need of foreign exchange market”. Everyone who is trading in this Forex market should do every trade legally.


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