Exotic currency refers to the types of money that come from smaller or less commonly traded economies. 

Unlike major world currencies like the U.S. Dollar (USD), Euro (EUR), or Japanese Yen (JPY), exotic currencies belong to countries that are either developing or have less active markets. 

Though these currencies can sometimes be more volatile, they play an important role in the global financial system.

What is Exotic Currency?

Exotic currency refers to the official money used by a country whose economy is relatively small or emerging. 

These currencies usually come from countries that do not have as much global influence as major economic powers like the U.S., Europe, or Japan. 

Exotic currencies are typically less traded on the global market, meaning that not many people exchange them daily compared to more common currencies.

Countries that use exotic currencies often have smaller economies that depend on fewer industries like agriculture, tourism, or natural resources. 

Since these currencies are not traded as often, they may experience larger price changes, also known as volatility. 

For example, the value of an exotic currency might rise or fall quickly depending on the country’s political or economic situation. 

These currencies are essential for those who live, work, or travel to those countries.

Example of Exotic Currency

Exotic currencies are the official currencies of smaller or emerging economies, typically not traded as frequently on the global market. 

These currencies are less liquid and can be more volatile than major currencies like the U.S. Dollar (USD) or Euro (EUR). 

Below are examples of exotic currencies, along with explanations for each:

1. Vietnamese Dong (VND)

The Vietnamese Dong is the official currency of Vietnam. It has one of the lowest values against the U.S. Dollar, making it a good example of an exotic currency.

Vietnam’s economy is growing rapidly, but traders still do not widely exchange the Dong outside the country.

1 Dong equals 10 hào or 100 xu, though people no longer use these smaller units in practice.

2. Indonesian Rupiah (IDR)

The Indonesian Rupiah is the official currency of Indonesia, one of Southeast Asia’s largest countries. 

Indonesia has a growing economy, but its currency is still considered exotic due to its lower value and limited global trading presence.

1 Rupiah = 100 sen (although sen coins are rarely used).

3. Kenyan Shilling (KES)

The Kenyan Shilling is the official currency of Kenya, a country in East Africa. 

While Kenya has a diversified economy, including tourism, agriculture, and services, its currency is considered exotic because it is not widely traded outside Africa.

Subdivisions: 1 Shilling = 100 cents.

4. Icelandic Krona (ISK)

The Icelandic Krona is the currency of Iceland, a small country in the North Atlantic. 

Despite its small population and economy, Iceland has a strong presence in the fishing and energy industries. 

The currency is not traded frequently outside of Iceland, which makes it exotic.

Subdivisions: 1 Krona = 100 aurar (although aurar coins are no longer used).

5. Tanzanian Shilling (TZS)

The Tanzanian Shilling is the official currency of Tanzania, another African country that relies heavily on tourism and agriculture. 

The Shilling is not commonly traded outside of the country, making it an exotic currency.

Subdivisions: 1 Shilling = 100 cents.

6. Malaysian Ringgit (MYR)

The Malaysian Ringgit is the currency of Malaysia. Malaysia has a robust economy, especially in manufacturing, oil, and palm oil production, but its currency is considered exotic because it is not as frequently traded internationally compared to major currencies.

Subdivisions: 1 Ringgit = 100 sen.

7. Colombian Peso (COP)

The Colombian Peso is the official currency of Colombia. While Colombia has a large population and diverse economy, the Peso is still considered exotic in the world of foreign exchange trading.

Subdivisions: 1 Peso = 100 centavos.

8. Moroccan Dirham (MAD)

The Moroccan Dirham is the currency of Morocco, a country in North Africa. Morocco has a relatively stable economy, with a focus on agriculture, manufacturing, and mining. 

Its currency is still considered exotic due to its limited use outside the region.

Subdivisions: 1 Dirham = 100 santimat.

9. Nigerian Naira (NGN)

The Nigerian Naira is the official currency of Nigeria, the most populous country in Africa. Nigeria’s economy is largely dependent on oil exports. 

The Naira is considered an exotic currency because it is not frequently traded on the global market, and it often experiences volatility.

Subdivisions: 1 Naira = 100 kobo.

10. Chilean Peso (CLP)

The Chilean Peso is the currency of Chile. Despite being a relatively stable and growing economy, the Chilean Peso is still classified as an exotic currency in international markets.

Subdivisions: 1 Peso = 100 centavos (although centavos are not used).

History of Exotic Currency

Exotic currencies have always existed, as countries all over the world develop their systems of money to match their economies. 

In ancient times, people traded using precious metals like gold or silver, but over time, each country developed its currency system.

For instance, countries like Vietnam, Thailand, and Kenya each have their own unique currencies that reflect their economy and culture. 

The rise of global trade led to the need for different currencies to be exchanged between countries, and the value of those currencies became an important factor for trade and travel.

The term “exotic currency” became more popular as the foreign exchange (Forex) market grew, making it easier to trade currencies from all over the world. 

Today, exotic currencies are traded alongside major currencies, although in smaller amounts.

Exchange Rate System for Exotic Currency

Each exotic currency operates within a system where its value is compared to other world currencies. An exchange rate tells you how much one currency is worth in terms of another.

For example, 1 Vietnamese Dong (VND) may be worth only a small fraction of a U.S. Dollar (USD), while 1 Thai Baht (THB) could be worth a bit more. 

The value of an exotic currency can change based on many factors, such as the country’s economic health, government policies, and foreign investment.

In some cases, exotic currencies may be “pegged” to a major currency. This means their value remains tied to a stronger currency, like the U.S. Dollar, to provide stability. 

However, many exotic currencies float freely, meaning their value can change frequently due to market demand.

Subdivisions and Denominations of Exotic Currency

Exotic currencies work just like other currencies in terms of subdivisions and denominations. A currency usually breaks down into smaller units to make it easier to handle daily transactions.

For example, just like the U.S. Dollar divided into 100 cents, most exotic currencies have smaller units too. 

These smaller units help people make purchases that cost less than a full currency unit. Let’s look at some examples:

The Vietnamese Dong (VND) is divided into hào.

The Thai Baht (THB) is divided into satang.

The Kenyan Shilling (KES) is divided into cents.

Countries issue both coins and banknotes. It handles smaller values, while banknotes come in larger denominations to make it easier to buy expensive items.

Coins

Coins in exotic currencies typically handle small purchases, like buying a snack or paying for a bus ride. For instance:

• In Thailand, you will find coins in 1, 2, 5, and 10 Baht denominations.
• In Kenya, you can find coins in 1, 5, 10, and 20 Shillings denominations.

Banknotes

Banknotes come in higher values and are used for more significant purchases like groceries, rent, or electronics. Most exotic currencies issue banknotes in several denominations. For example:

• The Vietnamese Dong (VND) has banknotes in 500, 1,000, 10,000, 20,000, and even 500,000 Dong.
• The Kenyan Shilling (KES) issues banknotes from 50 to 1,000 Shillings.

Economy and Challenges for Exotic Currency

Countries that use exotic currencies often have smaller economies that depend on a few key industries. For example:

Tourism plays a huge role in economies like Thailand and the Maldives. These countries welcome millions of tourists every year, and the money tourists spend helps keep the economy running.

Agriculture forms the backbone of many countries using exotic currencies. Farmers in places like Kenya rely on exports of coffee, tea, and other products to generate income.

Natural resources are crucial for countries rich in materials like oil or minerals. Nations like Indonesia and Nigeria benefit from exporting these resources, which brings foreign currency into their economies.

These countries face challenges. Economic problems, political instability, or natural disasters can hurt the value of an exotic currency. 

Countries that rely heavily on tourism or exports may struggle if global markets slow down, making it difficult for the currency to hold its value. 

This can cause inflation, where prices rise quickly, making it harder for people to afford goods and services.

Conclusion

Exotic currencies give us an interesting view of the economies of smaller and developing countries. 

Although few people use these currencies globally, they hold great importance for those who rely on them daily.

They link to sectors like tourism, farming, and natural resources, revealing the unique economic conditions of various countries.

Learning about exotic currencies helps us understand the variety of financial systems around the globe and how important these currencies are for trade and travel between nations.