A currency swap is the most common type of forwarding trade. With the understanding that they will reverse the trade later, one party exchanges currency for another for a predetermined period. The contracts for these products are not standard, and they aren't traded on an exchange. To keep a position active until the trade is completed, a deposit is required.

A currency swap is a financial agreement between two parties to exchange principal and interest payments in different currencies. Typically, one party will make payments in a foreign currency, while the other does so in their domestic currency. The swap allows both parties to hedge against currency risk, manage debt, or gain access to lower interest rates.

The exchange of principal occurs at the start and end of the agreement, while interest payments are exchanged periodically. Currency swaps are often used by multinational corporations or governments to optimize borrowing costs or hedge against fluctuations in exchange rates. They are distinct from interest rate swaps, which only involve the exchange of interest payments in the same currency.