Currency swaps allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements.

Question

Quizplus · Accepted Answer

This statement is true. Currency swaps are a financial instrument used by firms to mitigate their exposure to fluctuations in foreign currency exchange rates by exchanging interest and principal payments in one currency for those in another currency at a pre-agreed exchange rate. This allows firms to minimize their currency risk and avoid potential losses caused by unfavorable exchange rate movements.

Currency Swaps Allow Firms to Exchange Currencies at a Previously