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. Nonconvertible Currency

    Any currency that is used primarily for domestic transactions ...
  6. Currency Pair

    The quotation and pricing structure of the currencies traded ...
Related Articles
  1. The New World Of Emerging Market Currencies
    Forex Education

    The New World Of Emerging Market Currencies

  2. Can Investors Trust Official Statistics?
    Economics

    Can Investors Trust Official Statistics?

  3. Investing In China
    Investing Basics

    Investing In China

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

    Examining Credit Crunches Around The ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center