For example, a government with low reserves of hard foreign currency usually restricts currency convertibility because that government would otherwise not be in a position to intervene in the foreign exchange (forex) market (i.e., to revalue, devalue) in order to support their own currency if and when necessary.

Why do governments limit currency convertibility?

Why do governments limit currency convertibility? To preserve foreign exchange reserves. ... Governments can restore monetary control by removing the obligation to maintain exchange rate parity.

Why do governments impose currency restrictions?

Exchange controls are government-imposed limitations on the purchase and/or sale of currencies. These controls allow countries to better stabilize their economies by limiting in-flows and out-flows of currency, which can create exchange rate volatility.