Showing posts with label Exchange rate. Show all posts
Showing posts with label Exchange rate. Show all posts

Tuesday, November 22, 2022

What is a Currency Swap?


  • A currency swap, also known as a cross-currency swap, involves the exchange of interest—and sometimes of principal—in one currency for the same in another currency. The interest payments are exchanged at fixed dates. Interest rates can be fixed or floating.
  • The two parties agree in advance whether or not they will exchange the principal amounts of the two currencies at the beginning of the transaction. Some currency swaps are for notional principal amounts, and the principal amounts are not actually exchanged between the parties. If there is an exchange of principal at the start of the deal, the exchange will be reversed when the contract reaches maturity.
  • It is common for the contract to specify that interest rate payments will be calculated quarterly and exchanged semi-annually.
  • Interest payments are normally not netted since they are in different currencies.
  • In the United States (and many other countries) the law does not require currency swaps to be shown on a company´s balance sheet.
  • Even though a Currency Swap is considered a foreign exchange transaction, it is not the same thing as a Foreign Exchange Swap (also known as forex swap or FX swap).

Fixed to fixed, floating to floating, or fixed to floating

There are three variations on the exchange of interest rates:

  • Fixed-rate to fixed rate
  • Fixed-rate to floating rate
  • Floating rate to floating rate (this type of swap is also known as a basis swap)


Company A is initially obligated to pay a fixed interest rate on a loan denominated in euros. By using a currency swap, Company A can swap that to a rate in United States dollars, and the exchange rate can be either fixed or floating.


Early on, currency swaps developed as a way of circumventing exchange controls imposed by governments. Today, they are utilized for other reasons and have become important financial instruments for banks, investors and multinational corporations.

A company can, for instance, use a currency swap to hedge a long-term investment and change their interest rate exposure. Another reason behind the existence of the currency swap is that a company which is based in one country and is doing business in another can use a currency swap to get more favourable interest rate terms and conditions for a loan denominated in the local currency than the rates offered by the local banks.

And even though they started out as a way to circumvent national law, governments today use currency swaps as well. One notable example is from October 2018, when the governments of India and Japan signed a bilateral currency swap agreement worth 75 billion USD to stabilise India's forex and capital markets.


Traditionally, the pricing in currency swap contracts has been expressed as the London Interbank Offered Rate (LIBOR) plus or minus a certain number of points.

After a number of scandals, the validity of LIBOR as a benchmark has come into question, and the use of LIBOR in currency swaps is being phased out in favour of other benchmarks, especially the Secured Overnight Financing Rate (SOFR).

The US Federal Reserve and the UK financial authorities have announced that LIBOR will not be used in this context after June 30, 2023.

Implied exchange rate

The ratio between the two principal amounts creates an implied exchange rate.

Example: This swap involves 10 million euros and 11 million U.S. dollars. The implied EUR/USD exchange rate is, therefore, 1.10.

When the contract reaches its maturity, the two principal amounts will be exchanged. Because of this, there is an exchange rate risk involved in the currency swap, as the market exchange rate for EUR/USD might not be 1.10 on the maturity date.

Sunday, November 5, 2017

What is the Current Exchange Rate Outlook between the Euro and the Dollar?

The macroeconomic developments of the year 2017 have been deeply influential in relation to the United States dollar and the euro. As the most active foreign exchange currency pair, EUR/USD has become a yardstick of the global economy due to the quantitative easing programs respectively enacted by Federal Reserve and the European Central Bank; to this effect, the ECB’s late October decision to extend its QE program has pretty much defined the outlook of both currencies for the rest of the year.

A Weaker Euro

The euro had been holding steady over the summer and even as the weather turned cooler; however, it started losing ground in mid-October as many analysts believed that the ECB directors would vote to keep QE in place. 

The European economies are in the clear with regard to the debt crisis; however, full economic growth has not been reached and there are questions related to ongoing issues in the United Kingdom and Spain. As a result, EUR/USD lost about 1.44 percent.

A Stronger Dollar

The greenback finished October at higher levels than expected thanks to positive reports related to the American economy. Wall Street has performed very strongly in 2017, and the economic recovery over the last few years has continued at a gradual pace. 

Economic growth in the third quarter stood at three percent, half a percentage point better than expected.

The Brexit Factor

The United Kingdom has made little progress in the Brexit talks to exit the European Union. If British leaders start softening their Brexit stance for the purpose of taking advantage of the single market, both the euro and the pound sterling will likely post gains. 

At any rate, the Brexit negotiations will probably continue well into 2018, and there will be room for the pound and euro to gain value on positive news.

Converting Dollar Reserves

Governments, banks and even individuals around the world have been increasing their dollar reserves in 2017, and they have been doing so in anticipation of the current situation. 

Some companies, like Continental Currency Exchange, know that analysts believe that USD reserves may be paired down from now until late December. Institutions and individuals are taking advantage of favorable currency exchange rates. 

As long as investors continue to react positively to earnings reports issued by companies listed on the S&P 500, Wall Street will keep its bullish run, particularly if employment numbers are positive, and this means a stronger dollar.

In the end, the USD will likely hold an economic advantage over the euro in the months to come; however, this outlook could be slightly reversed if dollar reserves around the world are converted into profits.

Thursday, January 23, 2014

A Reliable E-Currency Exchanger For Your Online Business

Exchange Money Conversion to Foreign Currency

Investing Online? Look For The Best E-currency Exchanger

Finding a reputed and established e-currency exchanger that can offer the best services is very important, especially if you are involved with online investing. To put it simply, it’s one of the most crucial aspects to consider when you are involved with a business where you send/receive money online.

When you have an online business that helps you make a pretty good amount of profit and also growing at a rapid pace, you have to look for an e-currency exchanger so that you can receive the funds/amount in your country’s currency. However, it’s not really an easy task to find a reputed e-currency exchanger who can help you get the amount within a short span of time.

Understanding The Concept Of E-Currency

To put it simply, depositing and withdrawing amount/business online is definitely a daunting task. Although there are many e-currency exchanging companies out there in the market, you cannot trust everyone. Therefore, you need to be a little careful while choosing the e-currency exchange
company for your online business.

E-currency is one of the best ways to get the funds in your personal account. Though some of the people decide to choose the bank wire, but it can be an expensive option. Moreover, banks take a lot of time to deposit the funds.

Now, you simply don’t need to worry because it’s the e-currency service providers who can easily transfer the funds to your personal account easily. They make use of a payment processor to transfer the funds in your currency. You have to choose the currency depending on the present location where you are living or kind of client you are dealing with.

Submit Your Identity Proof/Address

Just like any other bank or financial institution, e-currency exchangers ask the consumers to submit some form of verification before carrying out any kind of investment. Therefore, you have to submit the identity proof along with a utility bill which will prove the residential address.

Some of the e-currency providers may also ask you to provide some other details. Normally, most of the providers ask you to submit the scanned documents so that the process can be completed more quickly and easily. Once you have set up the account, it becomes easy for you to deposit and withdraw the amount easily.

Of course, nothing is free in this world. Depending on the amount of transaction, there is a specific amount which will be charged. It’s advisable to do some online research when you are looking for e-currency providers so that you can find the best one which will meet all your needs.

If you want to know about e-currency exchange provider, there are many good websites which can give you some excellent tips to find the best provider. You should read Daily Released reviews or client-testimonials of the different e-currency websites before making any choice. No matter the kind of online business you are involved; keep all these tips in mind to find a reliable e-currency exchange provider. For more information you can click this link

Friday, October 4, 2013

Forex Trading Demo For Beginners

International Currency Money for Forex Trading
Forex trading is a speculative business and before you enter this world it advisable that you practice trading by opening a Forex trading demo account. Most of the Forex brokers provide you with free demo accounts but it is important to choose the correct one. The account should have close resemblance with real money accounts and have maximum time limit for operating them. There should be minimum difference between a real and a demo account so that you are not heartbroken when you step into the real world. 

How to open a Forex demo account?

Forex trading demo account deal with virtual money and it is important to look for the amount of virtual money they offer. The more, the merrier. There are numerous Forex demo account providers but it is advisable to choose the one by seeing what brokerage is offering it. You should also look into the trial package it offers along with the charges and mode of payment. The necessary steps in order to open a Forex demo account is quite simple. You need to visit the brokerage website, register your name and e-mail, look at the terms and conditions, and you are all set to trade with your virtual money.

Advantages of trading on demo first:

Using a Forex trading demo account can be worthwhile experience for new budding traders. Firstly, you get a realistic feel of the forex market as the accounts have a realistic touch to them. Secondly, you can learn while you trade and that’s a very good opportunity to newbie’s who wants to get the understanding of the market. Thirdly, there is no real money involved so, a trader can do business without any risk of losing money. Lastly, it provides a good platform to test a strategy. You can always try your creative business mind and see the results for yourself. A Forex trading demo account can be a learning curve for all amateur traders out there.

What drives the Forex market?

Forex market is elastic and changing. It does not follow anyone’s guidelines nor will it follow your set of rules. It is driven by these factors namely- politics, speculators, business transactions and central banks. Political condition of a nation reflects the economic stability. Political unrest forces the investors to sell which results in the fall of currency. The role of central banks in determining the rate of interest also impacts the exchange rate of a nation. Foreign exchange being one of the largest markets in the world boasts of great business transactions. These great transactions often affect the Forex market and the currency of the country as well. As mentioned earlier, that Forex being a speculative business is bound to work on the theories and guess work of the traders. If the traders believe that prices may go high in future, they tend to buy, ultimately impacting upon the prices.

It’s easy to open a Forex trading demo account and quite risk free to trade with fake money. Although it is not serious business when you are trading with your demo account but it should be dealt seriously as it is the foundation stone to your Forex dreams.

Friday, March 8, 2013

Forex Basics

International Currency Money for Forex Trading
International Currency Money for Forex Trading (Photo credit:
The Internet and advent of electronic funds transfer in the early 90s made the world’s forex markets readily accessible. Today, the forex is one of the largest securities market in the world. Different players contribute to its market volume including individual investors, and huge hedge funds among others. Forex trading continues for 24hours as traders try to profit from changes in currency exchange rates. 

Basically, forex trading is quite simple because it involves buying one currency with another. If a trader buys a currency with another and the exchange rates of the two currencies move in the favour of the trader, the forex trader can buy back the original currency at a profit.

Trading in the forex market is based on a bid/ask system. The difference between a seller’s asking price and the buyer’s bid is called a spread. The smallest increment in the exchange rate is known as a pip and is usually one one-hundredth of the US cent. Commissions are not charged by forex brokers. However, brokers mark-up spreads to 3-20 pips and keep it as their fee.

Forex trading is all about exchange rates. To monitor changes in currency exchange rates, traders need to analyse forex charts, which show trading activities within a certain timeframe. There are several types of forex charts but the most common are bar charts and candlestick. Traders should have proper understanding of these charts to spot trends and make smart trading decisions.

How to read a Forex Chart

  • Locate a chart to analyse. Charts can be found online or in specific forex markets
  • Find the range. Charts are a reflection of short and long term trading. Forex trade beginners can easily read charts with a range of at least a day but not more than one week. 
  • Identify the chart type. Bar charts have price ranges indicated with vertical bars while candlestick charts have vertical rectangles. Line graphs do not have bars or rectangles. Charts come in different forms and traders can switch to candlestick or bar charts for easy interpretation. 
  • Locate open and close prices on horizontal “pegs” in a bar chart and top and bottom of rectangles on a candlestick. When the open rate is lower than the close rate, the rate has an upwards trend and the opposite is true. 
  • Look at the chart as a whole. It will have groups of bars with different colors moving up or down indicating upward and downward trends respectively.

Common Mistakes in Forex Trading

Lack of knowledge

Forex trading is complex. There are many factors that affect currency markets including interest rates, inflation, elections, wars and money supply among others. These cause currencies in affected regions to swing up or down. Traders without knowledge of the countries whose currencies they trade in can make poor trade decisions.

Lack of discipline
One of the most important traits that forex traders should possess is money management skills. Traders with a plan on where to sell in case a trade is losing money can make higher profits.

Getting too complicated
Some people believe that the more complex an investment is, the more profitable it can be. This is not always the case with forex trading. Most traders who benefit from forex trading do the basics.

Some traders also believe they can make high returns every day. This makes them take huge risks in a bid to make more. Eventually, they lose all their money if they invested blindly.

With forex, traders can make huge profits on their investments but with the wrong decisions, they can also incur huge losses. Forex traders who learn the basics can avoid making blunders that will make them lose money.

If you want to learn more about Forex trading and want to understand those seemingly complicated currency charts, you can visit

Thursday, March 7, 2013

Currency Trading

Currency trading can be a fascinating and profitable field of investment for those who learn the market well and have access to brokers offering good guidance. 

Through education and experience the currency market, or "forex" (FX) for short, can offer unlimited investment opportunities that are often as good or better than the traditional stock market offers. 

What is Currency Trading?

The currency market continues to grow in size, even though it is already the world's largest investment market. There are literally trillions of dollars in average daily turnover, in contrast to the mere billions in the daily volume that occurs on the New York Stock Exchange. 

It is a 24-hour market (excepting weekends) consisting of three trading sessions that include the United States, Europe, and Asia. Unlike the stock market, in which investors deal in single stocks, currency trading is done in pairs, buying one while selling another. 

The trick is to make these exchanges profitably. Currency markets are influenced by the same factors as the stock market, such as supply and demand, interest rates, economic data, and world events. 

How to Succeed at Currency Trading

Just as with the stock exchange, in currency trading, there is no automatic formula for success. With currency trading, you need to follow the market carefully and thereby learn the way various currencies typically respond to specific events and economic and political developments. 

Just like you would want to know something about the businesses in which you are buying stock, so you would want to know the economic and political factors influencing a specific currency. Many investors find this monitoring of the world currency markets fascinating. 

The Importance of early guidance in the currency trading market is easy to learn, but the strategies for making money consistently require a combination of both experience and sound advice. 

The regular use of an experienced forex broker is highly recommended in the early stages of entering this market so that you can be warned away from typical and potentially expensive beginner's mistakes. 

Once you gain enough knowledge and experience, you can determine what investment strategy works best for you. Many investors find that currency trading is more interesting and exciting than the New York Stock Exchange, with as many or more opportunities to profit financially. 

It is certainly worth talking with a forex broker to help to determine whether the currency trading market is right for you.

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