Exotic currencies are types of money that aren’t traded very often in foreign exchange markets. They’re not commonly used in global financial transactions.
Exotic currencies come in two types: convertible and non-convertible. The Mexican peso, for example, is a convertible exotic currency, meaning it can be exchanged freely in foreign exchange markets. On the other hand, the Brazilian real is an example of a non-convertible exotic currency, which means it’s subject to restrictions when it comes to exchanging it for other currencies.
Some of the most commonly traded exotic currencies include:
- 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 rand (ZAR)
- Brazilian real (BRL)
- Indian rupee (INR)
Understanding Exotic Currencies
An exotic currency is a type of money that isn’t traded very often in foreign exchange markets. They’re not as easy to trade as major currencies like the U.S. dollar or the euro. Exotic currencies are often linked with countries that are still developing or emerging. They’re not as stable and can be quite unpredictable.
Trading in exotic currencies can be costly because there’s not a lot of trading activity, which means the difference between buying and selling prices (the bid-ask spread) is usually large. Examples of exotic currencies include the Thai baht, the Mexican peso, and the Saudi Arabian riyal.
Unlike major currencies, which are traded more freely, exotic currencies may face restrictions on conversion and are not as widely accepted. They can also be influenced more by political changes rather than just economic factors.
Exotic currencies tend to be riskier because the countries they belong to may have less stable economies. This means their value can change a lot in a short time, making them more volatile. Investors who want to trade in exotic currencies usually need to have more money set aside in their brokerage accounts to cover any big losses that might happen due to these changes.
Trade on the Go. Anywhere, Anytime
One of the world's largest forex brokers is ready for you. Enjoy competitive fees and dedicated customer support while trading securely. You'll also have access to their tools that make it easier than ever to view your trade history, copy trades, manage investments from other traders, view price charts, and make conversions with zero fees. Make an account for free and join millions of traders and investors on the global forex market.