Topics: Balance of payments • Bank of Japan • Bilateral swap agreement • Currency swap • RBI • Reserve Bank of India • Yen India and Japan signed a swap agreement during Prime Minister Modi`s visit to Japan on October 28, 2018. The currency exchange agreement is for $75 billion and is a great opportunity for India to get foreign currency by exchanging rupee in Japan. Although the central part of the deal is Japan`s obligation to exchange U.S. dollars for Indian rupees, the Japanese yen is one of five currencies included in the IMF`s SDRs basket and considered a global hard currency. The currency exchange agreement between India and Japan appears to be the exchange of reserve currency (dollar) for a non-reserve currency (rupee). It is an agreement between two friendly countries, which have regular, substantial or growing exchanges, to essentially integrate exchanges in their own local currencies, both paying for import and export exchanges at exchange rates fixed in advance, without bringing in currencies from third countries such as the US dollar. Themes: Bangladesh • Bhutan • Currency swap • Maldives • RBI • Reserve Bank of India • Rupee • SAARC • srilanka • US Dollars The Reserve Bank of India (RBI) has decided to promote economic cooperation within the member countries of the South Asian Association for Regional Cooperation (SAARC), the framework of the exchange rate agreement was revised on Tuesday, November 26, 2019. The Currency Exchange Mechanism for ASARC member states entered into force on 15 November 2012. The current one. Currency swap arrangements can be bilateral or multilateral. The first currency exchange was signed between the U.S. Central Bank and the French Central Bank on February 28, 1962. In addition to monetary or exchange rate stability, government-to-government swaps also have complementary objectives such as promoting bilateral trade, maintaining the value of foreign exchange reserves with the Central Bank, and ensuring financial stability (protecting the health of the banking system).
The currency swap with Japan will help India calm the derogatory trend of the rupee. In the future, RBI swaps can run rupee against dollar to ensure exchange rate stability. As already said, the main objective of currency swaps is to avoid turbulence and other risks in the foreign exchange market and the exchange rate. Central banks and governments conduct sw swps of currencies with foreign counterparties to ensure an appropriate foreign currency in times of currency shortage. Both work for the same purpose and through similar mechanisms. Generally, there are five types of currency swap arrangements, depending on the nature and status of the currencies being swaps. According to early reports, in addition to the Japanese yen and the Indian rupee, the swap also concerns the US dollar. Under the agreement, the Bank of Japan will accept rupees and give dollars to the Reserve Bank of India (RBI) and, similarly, the RBI will take the yen and give dollars to the Bank of Japan to stabilize the other`s currency.
The word swap means exchange. A currency exchange between two countries is an agreement or contract for exchanging currencies (of both countries or of any hard currency) with predetermined conditions. (4) the exchange of reserve currency for a non-reserve currency; and themes: Economy • Cabinet Decisions • Currency Swap • Economy • India-UAE • National Context: With the aim of strengthening financial stability and economic cooperation, the Reserve Bank of India has revised the framework of monetary swap arrangements for SAARC countries until 2022. . . . .