Currency Swap

A currency swap is the exchange of currency between two parties. Interest payments are exchanged on fixed dates for the duration of the contract. It is considered a foreign exchange transaction and is not required by law to appear on the balance sheet of a company.

Originally, currency swaps were designed to circumvent exchange controls, ie government restrictions on buying and / or selling currency. Although countries with weak and / or developing economies typically use currency controls to limit speculation against their currencies, most developed economies have now eliminated controls.