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Currency controls, foreign exchange controls or currency exchange controls refer to restrictions applied by some governments to ban or limit the sale or purchase of foreign currencies by nationals and/or the sale or purchase of local currency by foreigners.

Fixed Rates A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.

To reduce the value of a currency there are a few policies the government could adopt. Looser monetary policy cutting interest rates. Looser fiscal policy cutting tax and increasing government spending. Selling reserves of currency on the foreign exchange market and buying rival currencies.

What Are Exchange Controls? Exchange controls are government-imposed limitations on the purchase and/or sale of currencies. These controls allow countries to better stabilize their economies by limiting in-flows and out-flows of currency, which can create exchange rate volatility.

A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.

It is decentralized in a sense that no one single authority, such as an international agency or government, controls it. The major players in the market are governments (usually through their central banks) and commercial banks.

Banning the use of foreign currency within the country; banning locals from possessing foreign currency; restricting currency exchange to government-approved exchangers; fixed exchange rates.