Glossary Term

Swap

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In FX a swap is a contract between two parties where they effectively swap the same amounts of two different currencies by lending one and borrowing the other. The repayments are set at a fixed date in the future and take place at the forward exchange rate both parties agreed to. If a company needs to settle a debt in a foreign currency and doesn’t want the risk of holding foreign exchange reserves, it can initiate a swap in order to meet its obligations.

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What is swap? A Traders Expert explanation

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