currency swap


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Currency swap

An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency. Usually fixed for fixed.

Foreign Exchange Swap

An agreement between two parties to exchange two currencies at a certain exchange rate at a certain time in the future. For example, if a company knows that it will need British pounds in the future and another company knows that it will need U.S. dollars, they agree to swap the two at the agreed-upon exchange rate. This eliminates the risk that the exchange rate will change in a way that is disadvantageous to one party or the other. They are also called currency swaps. See also: Swap.

Currency swap.

In a currency swap, the parties to the contract exchange the principal of two different currencies immediately, so that each party has the use of the different currency. They also make interest payments to each other on the principal during the contract term.

In many cases, one of the parties pays a fixed interest rate and the other pays a floating interest rate, but both could pay fixed or floating rates. When the contract ends, the parties re-exchange the principal amount of the swap.

Originally, currency swaps were used to give each party access to enough foreign currency to make purchases in foreign markets. Increasingly, parties arrange currency swaps as a way to enter new capital markets or to provide predictable revenue streams in another currency.

currency swap

see SWAP.

currency swap

see SWAP.
References in periodicals archive ?
KARACHI -- Trade and industry have drawn the attention of policymakers towards the currency swap agreement recently reached between India and United Arab Emirates (UAE), and warned that it would open up new avenues of trade between these two countries.
KARACHI -- The trading and business leaders have urged the government to enter into a currency swap agreement with UAE, considering the recent agreement reached between India and UAE.
The Bank of Thailand has said that it has renewed a three-year currency swap agreement with the People's Bank of China.
After signing the currency swap agreement (CSA) with People's Bank of China (PBoC), the SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China.
The EAD secretary was of the view that over $6 billion that the central bank borrowed under the currency swap arrangements were part of the $7.
Iran sees a solution to withstand possible future challenges in concluding bilateral currency swap agreements with some of its trade partners.
TOKYO, Oct 13 (KUNA) -- South Korea and China have agreed to extend their currency swap deal, the head of South Korea's central bank said, the Seoul-based Yonhap News Agency Friday.
South Korea and China were to hold another meeting Tuesday to discuss whether to extend the existing currency swap deal, the head of South Korea's central bank said.
Malaysia and Japan are finalizing a currency swap agreement of up to US$3 billion (about RM13 billion) to contribute to financial market stability and bolster ties between the two countries.
Colombo -- Prime Minister Nawaz Sharif on Wednesday said that Pakistan was examining the possibility of having a currency swap agreement with Sri Lanka, almost an year after India announced a similar deal with the island nation.
According to the companies, cross currency swap trades expose counter-parties to settlement risk as a result of the high value of initial and final principal exchanges.
Chinese officials signaled Saturday that they are willing to expand a US$24 billion currency swap program to help Russia weather the worst economic crisis since the 1998 default.