Why Foreign Exchange Controls are Necessary for Money Exchange Growth?

According to demand and supply factors in free economy a country’s currency is valued, and by a country’s government it may be fixed. Practically, conversion of one currency to another currency of a country is referred as Forex or foreign exchange. The value is determined by market based on investment, trade and tourism. Governments force various controls forms on foreign currencies to buy or sell by residents or local currencies to buy or sell by non-residents. This is known as Foreign Exchange Controls.

With weaker economical areas, most countries dealing controls are employed, that allows a country of a higher degree of stable economy which is due to in and out flows of currency by volatility of exchanging rate and amount is limited. As money from different countries are exchanging in a divine range, it is important to have money control facility in markets.

In the market economy the currency exchanging rate strategy is widely controlled and the authority has put some banned and restriction on the Forex. Only those of local and foreign money is allowed to purchase or trade on which the various forms of controls on the amount the government has placed to restrict or ban on it.

The authority such as a government agency and bank sets the rate and residents are required into their coming position to sell all Forex transactions to the authority that designates the exchange control.

The exchange rate control has a higher effect of activating imports and bridle exports than the rate of free markets. Foreign Exchange Controls include the fixed exchange rates, banning foreign currency use within country and the local residents from possessing foreign currency. It also puts restrictions on the imported and exported amount of currency.