DEFINITION of 'Convertible Currency'

A currency that can be readily bought or sold without government restrictions, in order to purchase another currency. A convertible currency is a liquid instrument when compared to currencies tightly controlled by a central bank or other regulating authority.

BREAKING DOWN 'Convertible Currency'

Developing countries or those with more authoritative governments are more likely to place restrictions on the exchange of currencies. Currencies from these countries are typically less stable, and may come from economies with high inflation rates, and are more illiquid.

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