Title: Blocked Currency
Headings: Blocked Currency
Blocked Currency
What Is a Blocked Currency?
Key Takeaways
Understanding Blocked Currency
Trading Blocked Currencies Through NDFs
Special Considerations

Content: For example, a nonconvertible currency may be able to be converted into only some currencies, or only in limited amounts. A nation might block their currency as a way to influence the market or economy of their country, or even monitor and influence their citizens’ behaviors. For example, a nation with high inflation rates might limit certain currencies to try to control the rates of inflation or to prevent bad financial investments. By restricting the exchange of one money to an outside currency, a country would try to control and keep its currency more stable. In other instances, a currency might be blocked by a country under communist control as a way to control its citizens and how they can make purchases. A communist country may want to prevent citizens from capital influences, for instance, and block currencies from nations they deem undesirable. China has frequently used blocked money in its financial practices. Depending on how large of a player the country blocking currency is on the global market, a blocked currency can have a widespread economic impact. Trading Blocked Currencies Through NDFs
There are ways to trade in foreign currencies which do not exchange internationally or whose trade is severely limited or legally restricted in the domestic market. Non-deliverable forward contracts (NDFs) can give a trader, for instance, indirect exposure to the Chinese renminbi, Indian rupee, South Korean won, new Taiwan dollar, and Brazilian real and other inconvertible currencies.