Swap Points
Co-Founder•1 min read
Swap points are the difference between the spot rate and the forward rate in a foreign exchange (FX) swap or forward contract. They represent the interest rate differential between the two currencies over the contract period.
Swap points are either added to or subtracted from the spot exchange rate to calculate the forward rate — depending on which currency has the higher interest rate.
Example:
If the spot rate for GBP/USD is 1.2500 and the 3-month forward rate is 1.2525, the swap points are +25 (indicating the USD has a lower interest rate than GBP).
Used in:
FX forwards, swaps, and treasury management to price and manage currency exposures over time.