Not to be confused with Currency swap. The difference between the forward rate and the spot rate for a particular currency pair when expressed in pips is typically known as the swap points.These points are computed using an economic concept called Interest Rate Parity. This theory implies that the hedged returns received after investing funds in differing currencies should equate irrespective of what their interest margin calculating fx swap points are.Using this theory, forward traders determine the forex swap points for any given delivery date mathematically by considering the net cost or benefit involved when lending a currency and borrowing another against it during the period of time encompassed by the spot value date and the forward delivery date.
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