An exotic currency is a currency that is thinly traded and highly illiquid. The label “exotic” has nothing to do with the location or size of the country or countries where the currency is used.
Trading in an exotic currency is often an inefficient and expensive process as its lack of liquidity tends to lead to higher spreads in the exchange rate.
Exotic currencies can be both convertible, such as the Mexican peso, and non-convertible, such as the Brazilian real.
Some of the most commonly traded exotic currencies are the Mexican peso (MXN), Chinese yuan (CNY), Russian rouble (RUB), Hong Kong dollar (HKD), Singapore dollar (SGD), Turkish lira (TRY), South Korean won (KRW), South African rang (ZAR), Brazilian Real (BRL) and Indian rupee (INR).