Foreign Currency Swap

AAA

DEFINITION of 'Foreign Currency Swap'

An agreement to make a currency exchange between two foreign parties. The agreement consists of swapping principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. The Federal Reserve System offered this type of swap to several developing countries in 2008.

INVESTOPEDIA EXPLAINS 'Foreign Currency Swap'

The World Bank first introduced currency swaps in 1981 in an effort to obtain German marks and Swiss francs. This type of swap can be done on loans with maturities as long as 10 years. They differ from interest rate swaps because they also involve principal.

RELATED TERMS
  1. Forward Exchange Contract

    A special type of foreign currency transaction. Forward contracts ...
  2. Currency Substitution

    The use of a foreign currency in transactions in place of the ...
  3. Odd Date

    A type of maturity date for foreign-exchange contracts. Odd dates ...
  4. Topping-Up Clause

    A condition implemented in a back-to-back or two-currency loan. ...
  5. Currency

    A generally accepted form of money, including coins and paper ...
  6. Quote Currency

    The second currency quoted in a currency pair in forex. In a ...
Related Articles
  1. The New World Of Emerging Market Currencies
    Forex Education

    The New World Of Emerging Market Currencies

  2. Examining Credit Crunches Around The ...
    Personal Finance

    Examining Credit Crunches Around The ...

  3. Sovereign Wealth Funds - Friend Or Foe?
    Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

  4. Introduction To Asian Financial Markets
    Economics

    Introduction To Asian Financial Markets

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center