Agreement to exchange currency, then reverse the transaction in the future
Involves a spot sale of one currency together with a forward repurchase of the currency at a specific date in the future
Should use this when they need to raise finance in a currency issued by a country in which they are not well known and are, forced to pay a higher interest rate than would be available to a better-known borrower or local business
The main advantage = it allows the business to alter its exposure to exchange fluctuation without disregarding the original transaction
