FX Swap
The simultaneous purchase and sale of the same amount of a currency for two different value dates, typically a near leg at spot and a far leg forward. It is used to roll a hedge forward or manage short-term cash-flow timing.
Related terms
Forward Contract
An agreement to exchange a set amount of one currency for another at a fixed rate on a future date. It locks in today’s rate, protecting a business from adverse currency moves before a payment falls due.
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The amount added to or subtracted from the spot rate to price a forward contract. They reflect the interest-rate difference between the two currencies over the contract period.
Read full definitionLiquidity
How easily an asset can be converted into cash, or how readily a business can meet its short-term obligations. Strong liquidity means funds are available when and where they are needed.
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Spot Rate
The current market exchange rate at which one currency can be bought or sold for immediate delivery. Spot trades typically settle two business days later (T+2).
Read full definitionCurrency Pair
Two currencies quoted against each other, such as GBP/USD. The first is the base currency and the second the quote currency; the price shows how much of the quote currency one unit of the base is worth.
Read full definitionBid-Ask Spread
The difference between the price at which the market will buy a currency (bid) and the price at which it will sell (ask). A tighter spread means lower transaction costs.
Read full definitionPip
The smallest standard increment by which a currency pair moves, usually the fourth decimal place (0.0001). Pips are the common unit for quoting spreads and price movements.
Read full definitionSettlement (T+2)
The point at which both sides of a currency trade actually exchange funds. Most spot FX settles two business days after the trade date, written as T+2.
Read full definitionVirtual IBAN (VIBAN)
A unique IBAN issued on top of a master account, letting a business collect and reconcile payments in a customer’s or currency’s own name without opening a separate bank account for each one.
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