A Foreign Currency Swap is an agreement between two foreign parties to swap interest payments on a loan made in one currency for interest payments on a loan made in another currency. The result is that the borrower pays off his debt in Sterling and then converts it into dollars, while the lender pays in dollars and then converts them into Sterling.Swapping interest rate payments against each other is a popular way to solve problems in managing foreign currencies. A swap involves one party agreeing to make periodic interest payments on a loan it has issued in one currency, while another party agrees to make periodic interest payments on the same loan in another currency.The foreign currency swap is also called the forward exchange contract or foreign exchange transaction. It's an agreement between two parties whereby one agrees to pay a specific amount of money at a future date and another agrees to receive that same amount in return for receiving interest payments on another loan made in another currency.
