What is EXOTIC CURRENCY?

A currency that is not widely used in international trade and financial transactions and is thinly traded in the FOREIGN EXCHANGE markets; the general lack of LIQUIDITY can result in increased price VOLATILITY. Exotics, which are typically the currencies of LESSER DEVELOPED COUNTRIES or NEWLY INDUSTRIALIZED COUNTRIES, are often nonconvertible and subject to partial or complete EXCHANGE CONTROLS. See also NONCONVERTIBLE CURRENCY, RESERVE CURRENCY.

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