A currency swap is a combination of two opposite conversion transactions involving the same base currency but with different value dates. A currency swap is also known as an overnight (rollover) or rollover.

In essence, forex swaps are considered money market transactions, despite their formal nature being conversion transactions.

Forex swaps are typically executed with a single counterparty. In other words, both transactions are executed by the same bank or broker. This type of swap is called a "clean" swap in economic circles. If two conversion transactions with different value dates are executed by different counterparties, such a swap is commonly referred to as a structured swap. However, this type of transaction is not typical for trading on the international forex market.

Let's look at an example. A counterparty (a bank or brokerage firm) purchased $1 million against Japanese yen with a spot value date and sold the same $1 million on a two-month forward basis. This transaction would then be called a two-month US dollar to Japanese yen swap.

All currency swaps are divided into three types, depending on the maturity date. These include:

overnight or short-term swaps
standard
forward
The latter are characterized by a combination of transactions where the closest transaction is concluded on terms with a value date later than the swap, and the reverse transaction is concluded on terms with a later forward. Standard transactions typically have the closest value date—the spot—and the furthest value date—the forward. The spot is the second business day after the transaction is concluded.