What Is a Currency Swap ?

Currency Swap 

A currency swap, sometimes referred to as a cross-currency swap, involves the exchange of interest—and sometimes of principal—in one currency for the same in another currency. Interest payments are exchanged at fixed dates through the life of the contract. It is considered to be a foreign exchange transaction and is not required by law to be shown on a company's balance sheet. Key Takeaways  A currency swap involves the exchange of interest—and sometimes of principal—in one currency for the same in another currency.  Companies doing business abroad often use currency swaps to get more favorable loan rates in the local currency than if they borrowed money from a local bank.  Considered to be a foreign exchange transaction, currency swaps are not required by law to be shown on a company's balance sheet.  Interest rate variations for currency swaps include fixed rate to fixed rate, floating rate to floating rate, or fixed rate to floating rate.