Currency swap

Subject: Economy

Section: External Sector

A currency swap between two countries is an agreement or contract to exchange currencies (of the two countries or any hard currency) with predetermined terms and conditions.
Often the popular form of currency swap is between two central banks.
The main purpose of currency swaps is to avoid turbulence and other risks in the foreign exchange market and exchange rate.
Central banks and governments engage in currency swaps with foreign counterparts to ensure adequate foreign currency during the time of foreign currency scarcity.