Currency swap is in the exchange currency system. Think of it this way; if you have to pay someone in say Euro (EUR) and your money is in US dollar (USD), you will need to convert USD to EUR. That's call exchange outright. But, say you have debt to be in EUR in the future, and you're afraid that by the time your debt is due, the USD might be weakening against EUR, you then purchase a swap in EUR the amount of the debt you need to pay.
This is a straight forward swap, which means that you are converting USD to EUR with the exchange rate today, but you're not really deliver USD yet. You will however need to pay swap fee, which is mostly equivalent to the interest rate of EUR.
A simple explanation is that you are borrowing EUR from the date of swap until the date of payment, so swap fee equal to the interest rate you borrow.
The benefit is that you got rid of the exchange rate fluctuation.
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Currency swap is in the exchange currency system. Think of it this way; if you have to pay someone in say Euro (EUR) and your money is in US dollar (USD), you will need to convert USD to EUR. That's call exchange outright. But, say you have debt to be in EUR in the future, and you're afraid that by the time your debt is due, the USD might be weakening against EUR, you then purchase a swap in EUR the amount of the debt you need to pay.
This is a straight forward swap, which means that you are converting USD to EUR with the exchange rate today, but you're not really deliver USD yet. You will however need to pay swap fee, which is mostly equivalent to the interest rate of EUR.
A simple explanation is that you are borrowing EUR from the date of swap until the date of payment, so swap fee equal to the interest rate you borrow.
The benefit is that you got rid of the exchange rate fluctuation.
How Currency Swap Works