Hedging Currency Risk

SET THE EXCHANGE RATE FOR DIRECT AND REVERSE TRANSACTIONS

Currency Swap, for example: Your business cycle at certain stages implies the need of dollar sale and euro purchase, taking the reverse exchange from euros to dollars afterwards. In order to avoid the costs of a double currency exchange (counter operations on the exchange of currencies) and natural risks caused by exchange rate fluctuations, you can enter the currency swap.

Currency swap involves the simultaneous agreement on two transactions; in our example, the first transaction is to buy the euros and the second to sell them back for dollars some time later. Therefore, the exchange rates for the first and the second transactions are set in advance and already known. Consequently, you can adjust the expenditure part of the business cycle for the relevant costs while planning your work.
Accordingly, the currency risk is fully passed on to the bank.