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As an example, suppose a U.S.-based company needs to acquire Swiss francs and a Swiss-based company needs to acquire U.S. dollars.

The two companies could arrange to swap currencies by establishing an interest rate, an agreed-upon amount, and a common maturity date for the exchange. Currency swap maturities are negotiable for at least 10 years, making them a very flexible method of foreign exchange. Currency swaps originally were used to get around exchange controls.

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