Currency Swaps

A Currency Swap Contract is a contract which includes exchange of a currency between two parties within a specified timeframe at defined rates.
Currency swap is a two legged transaction. It constitutes of a spot and a forward transaction. Spot transaction is effected on the day the contract is signed, and it involves buy/sell of a currency at the specified rate. The opposite of the transaction is undertaken at a rate and on the date again specified on the first day of the contract (forward contract).
This exchange is carried out in order to benefit from the higher interest rate provided by one currency of the pair eliminating the currency risk during that timeframe.