Devisentausch

Devisentausch, or foreign exchange swap, is a bilateral financial instrument used to exchange currencies for a defined period and reverse the exchange at a future date. It combines elements of a spot transaction and a forward contract, allowing participants to obtain or lend foreign currency without exposing themselves to lasting market risk.

Mechanism and structure: At the outset, the two parties exchange specified amounts of two currencies at the current spot rate. At maturity, they swap the same notional amounts back, using a predetermined forward rate. The net effect is that each party borrows one currency from the other for a set period, with the forward leg reflecting the interest rate differential between the currencies through forward points.

Uses and participants: Devisentausch is commonly employed for liquidity management, funding in a foreign currency, and hedging against short-term FX movements. It is widely used by banks, multinational corporations, and, in some cases, central banks, to smooth foreign currency financing and manage balance sheet exposures.

Differences from other instruments: A currency swap (cross-currency swap) typically involves long-term interest payments in both currencies, whereas a standard FX swap focuses on the exchange of principal with embedded forward adjustments and shorter maturities. FX swaps are usually traded over the counter and may involve collateral or credit arrangements.

Risks and regulation: The main risks are counterparty credit risk and liquidity risk. Transactions are governed by financial market regulations and reporting requirements, and are commonly cleared or documented under bilateral agreements to manage risk.