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Freely convertible currency


Convertibility - quality which allows money or other financial instruments to be transformed to other liquid funds of savings. Convertibility is the important factor in international trade where the tools evaluated in various currencies, should be interchanged. It is hard currencies have direct value in the currency market, and it is a little restrictions in order and the size which they can be interchanged for other currency. Free convertibility - a hard currency key feature.

Some countries pass the laws limiting legal exchange rates of the currencies, or requiring the permission to an exchange of more certain sum. Some currencies, such as North Korean wons and Cuban peso, are officially unconvertible and can be interchanged only on a kerbs market. If the exchange official rate, its cost on a kerbs market frequently is positioned more low. Control facilities behind convertibility can be entered within the limits of the general monetary policy. For example, restrictions on Argentinean peso have been entered into economic crisis time in 1990th years and revised in 2002 during the subsequent crisis.

The Question on convertibility has risen for the first time during replacement in a monetary stock of commodity money notes. At gold and silver standards, notes interchanged on coins face value though often enough problem banks and the governments exhausted the reserves. Under a gold standard reflected in the Bretton-Vudsky agreement, issuing houses have been obliged to redeem the currencies in gold ingots or in US dollars which in turn, were subject to settlement in gold ingots on an official rate of 35 US dollars for troy ounce. Because of the limited growth of deliveries of gold, during the big inflation of dollar, the United States in long run have refused the gold exchange standard and investment convertibility in 1974.

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