Swap

A swap in foreign exchange (FX) is a simultaneous purchase and sale of the same currency pair for two different value dates — typically one near-term (spot) and one future-dated (forward).

It allows traders or businesses to roll over positions, manage liquidity, or extend hedges without exposing themselves to market risk from rate movements between dates. The difference between the two exchange rates reflects interest rate differentials between the currencies.

Example:

A company holding USD from a previous forward contract enters an FX swap to sell USD for GBP spot and buy it back one month forward, maintaining its USD exposure but adjusting timing.

Used in:

Treasury management, FX hedging, and managing cash or funding across currencies.