Union Currency Swaps

It is an agreement between two parties to exchange obligations in different currencies at the beginning, during the tenure and at the end of the transaction. At the start, initial principal is exchanged, though not obligatory. Periodic interest payments (either fixed or floating) are exchanged through out the life of the contract. The principal is exchanged invariably on termination at the exchange rate decided at the start of the transaction.

By means of currency swap, the counterparties can hedge their exchange rate and interest rate risk and also reduce the cost of funding.