What Is Currency Swap Agreement Between Countries

Of course, it could be the same thing, because interest rate policy and exchange rate policy are often inextricably linked. On the specified future date on which the swap is settled and the funds are returned, Central Bank 1, which has requested the activation of the swap, pays interest to Central Bank 2. In addition, some institutions use cross-currency swaps to reduce the risk of expected exchange rate fluctuations. If US Company A and Swiss Company B wish to receive the currencies of the other (Swiss francs and USD, respectively), both companies can reduce their respective exposures via a currency swap. A currency swap is often referred to as a currency swap, and for all intents and purposes, both are basically the same. But there may be slight differences. .