What is a closed currency?

Closed currencies have strict controls on their import and export which means they are not freely available outside of their country of origin.

The reality however is slightly different depending on the country and currency in question. It's often possible - and completely legal - to buy and sell closed currencies in the UK.

Although closed currencies are not supposed to be traded outside of their country of origin, you are legally allowed to take a certain amount into and out of the country without penalty.

The availability of closed currencies in the UK is driven entirely by travellers legally bringing currency into the UK and exchanging it for British pounds when they get here. Currency suppliers will usually keep hold of the closed currency so they can sell it on to another customer at a later date.

A popular example is Moroccan dirham. The dirham is closed which means you shouldn't technically be able to buy it outside of Morocco. However, travellers can legally bring back 2000 Moroccan dirham per person into the UK where they later exchange it for British pounds at a bureau de change. The bureau de change then has a stock of Moroccan dirham which they can legally sell on to another customer.

Availability of closed currencies in the UK

Because the market for closed currencies is largely driven by customers bringing it back into the UK, availability often varies according to supply and demand. You're more likely to be able to buy Moroccan dirham after the summer when holidaymakers have returned with leftover cash and exchanged it back into Sterling.

The amount of currency that can be legally exported from a country can also affect its availability in the UK.

As I just mentioned, you can take a maximum of 2000 dirham out of Morocco which is equivalent to about £160, but for China the limit is 20,000 yuan, worth about £2,500. Obviously the more currency that can be brought back into the UK, the more easily obtainable it will be and the better the exchange rate you'll get.

Buying a closed currency in the UK

If you do find a good deal on a closed currency in the UK, remember that the currency restrictions may also apply to the import of currency into the country of origin. This means for Morocco you can only legally bring in 2000 Moroccan dirham - any more than this and you'll have to declare it at customs on arrival and may have to pay a fine (although it's worth pointing out that this limit is per person so if two of you are travelling you'll be able to bring in 4000 dirham).

Import limits only apply to the closed currency; you can bring as much Sterling (or euros, US dollars etc.) into the country as you like, although if you're brining in more than £10,000 you will almost certainly need to declare it at customs.

Here's a summary of the current limits on closed currencies. These limits don't change very often, but don't rely on them - check the official travel advice for the country you are travelling to on the governments for the most up-to-date amounts.