Q. Consider the following statements regarding the Currency Swap Arrangement:
1. The exchange of currencies is determined by market determined exchange rate not on market rate.
2. The disputes out of arrangement are settled within the countries.
Which of the statements given above is/are correct?
Answer: B
Notes:
Currency Swap Arrangement is an arrangement, between two friendly countries, which have regular, substantial or increasing trade, to basically involve in trading in their own local currencies, where both pay for import and export trade, at the pre-determined rates of exchange, without bringing in third country currency like the US Dollar.
- In such arrangements no third country currency is involved, thereby eliminating the need to worry about exchange variations.
- The swap arrangement (in 2018) is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of USD 75 Billion for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange.
Source: The Hindu
