A forward swap in which a near-date foreign exchange transaction is settled not on a spot basis two days hence but on some forward date. A foreign exchange (FX) swap is typically a combination of two offsetting currency transactions with different dates. A FX swap is executed when one currency is exchanged for another on a near date only to reverse the transaction on a farther value date (far date). The value of a FX swap reflects the interest rate differential between the two underlying currencies. This swap must not be confused with a currency swap, as the latter has the features of both a FX swap and an interest rate swap.
January 21, 2025
