BANKING AFFAIRS

Detailed explanation-1: -Currency swaps are used to obtain foreign currency loans at a better interest rate than a company could obtain by borrowing directly in a foreign market or as a method of hedging transaction risk on foreign currency loans which it has already taken out.

Detailed explanation-2: -floating. Currency swaps involve exchanging cash flows generated from two different currencies to hedge against exchange rate fluctuations.

Detailed explanation-3: -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.

Detailed explanation-4: -How a Currency Swap Works. In a currency swap, or FX swap, the counter-parties exchange given amounts in the two currencies. For example, one party might receive 100 million British pounds (GBP), while the other receives $125 million. This implies a GBP/USD exchange rate of 1.25.