Foreign Exchange Management Right Ways

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In the international trade, exchange rate fluctuation is no new thing and one that is an everyday occurrence. In international trading businesses, fundamentally there are three types of foreign exchange exposure that companies face- transaction exposure, translation exposure and economic or operating exposure. Visit:


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For a currency or a Foreign Exchange swap contract, the interest rates have to be established for an agreed amount at a common maturity for the exchange. It’s a foreign exchange transaction which involves exchange of both the principal and the interest in one currency in lieu of the other currency, wherein the interest rates are benchmarked to  LIBOR . Thus it is similar to an interest rate swap but in this case the currency which is the principal is exchanged. As the exchange rate can change over the period of time, the currency swaps give the two countries the comfort of knowing the amount they have to pay and receive at the maturity. Thus they help in hedging the foreign currency risk . The Reserve Bank of India (RBI) has the flexibility to manage liquidity through these swaps. It can either sell the exchanged currency to importers for their bills or foreign loans can be paid by the borrowers. They also have the option to increase the  Forex Reserves  which should control the depreciation of Rupee . F oreign Exchange Swap

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For the agreement to achieve its goal, it’s essential for exporters to strictly give quotations in Rupee for trade. This will work in tandem to government’s efforts in procuring more foreign exchange swaps. The currency swaps help in reducing the shoring current account deficit. Thus these swaps in the  Foreign Exchange Market s  are important for any economy which wants mitigate risk of long term currency fluctuation . If you have any needs related to  Foreign Transaction Management  & risk hedging Please drop your details in the chat box or email us in the contact details mentions in contact us page. . India’s foreign exchange swap contract with other countries

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