Foreign exchange swap

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Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates.

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.
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The most impactful of those is the reclassification of cost of foreign currency swaps which are now classified under interest expense (previously these were netted against income from foreign currency).
Mounting pressure on FOREX reserves (USD 14.6bn at present, SBP reserves at USD 8.1bn and import cover at a meagre 1.7 months), negative net international reserves at ~USD 10bn (NIR - adjusting SBP reserves with forward foreign currency swaps and scheduled debt servicing for 1 year), alongside the infamous Current Account Deficit (at USD 4.8bn in 4MFY19; -4.6% YoY) has persistently stressed the PKR-USD parity.
" "Mounting pressure on foreign exchange reserves ($14.6bn at present, SBP reserves at $8.1 billion and import cover at a meagre 1.7 months), negative net international reserves at ~$10 billion (NIR ndash adjusting SBP reserves with forward foreign currency swaps and scheduled debt servicing for 1 year), alongside the infamous current account deficit (at $4.8 billion in 4MFY19 -4.6 per cent YoY) has persistently stressed the PKR-USD parity," said Arif Habib.
'The $7.22 billion foreign currency swaps must have been avoided due to the country's bad experience in late 1990s,' said former finance minister Dr Hafiz Pasha.
During the last month of 2014, the FX swaps were down to zero as the central bank released all its foreign currency swaps which amounted to less than $1 billion in the previous month.
One is the use of short-term foreign currency swaps in Reserve Bank domestic short-term liquidity management operations.
The European Commission is still waiting for clarifications from the Greek government on how it used foreign currency swaps with US investment bank Goldman Sachs to mask the true level of its debt when it joined the euro.
The category includes repurchase agreements, primary credit, foreign currency swaps, the Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF), securities lent to dealers (including the Term Securities Lending Facility or TSLF), and credit extended to AIG.
Topic 84-7 Termination of Interest Rate Swaps 84-14 Deferred Interest Rate Setting 84-36 Interest Rate Swap Transactions 85-6 Futures Implementation Questions 86-25 Offsetting Foreign Currency Swaps 86-26 Using Forward Commitments as a Surrogate for Deferred Rate Setting 86-28 Accounting Implications of Indexed Debt Instruments 86-34 Futures Contracts Used as Hedges of Anticipated Reverse Repurchase Transactions 87-1 Deferral Accounting for Cash Securities That Are Used to Hedge Rate or Price Risk 87-2 Net Present Value Method of Valuing Speculative Foreign Exchange Contracts 87-26 Hedging of Foreign Currency Exposure with a Tandem Currency 88-8 Mortgage Swaps 88-18 Sales of Future Revenues
We exclude foreign currency swaps by the Bank of Ghana (the central bank) from usable reserves.
The solution to the financing of the current account deficit does not lie in anticipating capital flows, borrowing short-term money in the garb of foreign currency swaps with Turkey, China, etc, but in raising our exports, shifting the current policy bias in favour of import substitution to exports and improving productivity through better access to technology and public and private investment in high-quality education and technical and vocational skills.
The specifics of calculating the required collateral posting amount for foreign currency swap counterparties is presented in Appendix B.

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