FX Swap
If you are an importer or exporter to a country that does not have EUR as its domicile currency, you can fix the exchange rate at which you will make an FX transaction
Simply put:
- it represents two transactions: one of which is FX Spot - purchase (sale), and the other FX Forward - sale (purchase) of foreign currency
- Purchase exchange rate in future is determined in the same way as the FX Forward rate.
Currency Exchange advantages:
- Exchanging "excess" of one currency for another if you need liquidity
- A deferred instrument: FX Forward transaction.
Currency Exchange risks:
- The change in the market exchange rate does not affect the agreed transaction, which will always be executed at the agreed exchange rate
- The FX Swap contract cannot be canceled, only postponed or closed based on the current market exchange rate – there is a risk of negative exchange rate differences.