Foreign exchange controls are ways that countries try to ensure that their own people do not buy "too much" foreign currency and that foreign people do not buy "too much" of the country's own currency. This is usually done to control the exchange rates.
There are a number of ways in which this can be done. Some examples include:
- A country can set limits on the amount of currency that may be brought in to or out of the country.
- It may ban its citizens from possessing any foreign currency.
- It may require official permission from the government to make any transactions involving foreign currency.
- It may fix its exchange rates.