DEFINITION of 'Nonconvertible Currency'

Any currency that is used primarily for domestic transactions and is not openly traded on a forex market. This usually is a result of government restrictions, which prevent it from being exchanged for foreign currencies.

Also known as a "blocked currency".

BREAKING DOWN 'Nonconvertible Currency'

As the name implies, it is virtually impossible to convert a nonconvertible currency into other legal tender, except in limited amounts on the black market. When a nation's currency is nonconvertible it tends to limit the country's participation in international trade as well as distort its balance of trade.

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