If we talk about international trade, all we know is that the internationally excepted currency is Dollar.
But do you also know that there can be trade between two countries in their own currencies by a Currency Swap Pact?
To enhance more knowledge, the people appearing for any competitive exam can check the following details about Currency Swap.
Recently a currency swap agreement has been signed to boost investment and without using dollars or other international currencies, enable direct trade.
India and the United Arab Emirates (UAE) have signed two agreements apart from mutual Currency Exchanges on 04 December 2018.
These agreements were taken after extensive discussions with Foreign Minister Sushma Swaraj and UAE Foreign Minister Sheikh Abdullah Bin Zayed Al Nahyan.
The UAE Foreign Minister received a warm welcome before the UAE-India Joint Commission Meeting (JCM), which was scheduled on 03 December 2018 for two days.
Advancing the broad strategic partnership, Foreign Minister Sushma Swaraj and Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan co-chaired the 12th India-UAE JCM.
This is the 12th session of the Indo-UAE Joint Commission for Economic and Technical Cooperation.
What is currency swap?
Currency swap is an agreement that allows the two countries to trade in their currency.
In addition, they will be able to pay for both import and export.
This will be paid at a pre-determined rate without bringing the third benchmark currency such as a US dollar.
Key facts related to the agreement
In the agreement, the two countries have agreed that they will be able to pay in mutual trade instead of the dollar in each other's currency.
With the agreement on currency swaps (exchange of currencies), India is expected to help the United Arab Emirates (UAE) buy crude oil at low prices.
Both leaders also emphasized on enhancing cooperation in areas such as trade, security and defense.
With the second agreement, the two sides will be able to take forward development projects in Africa.
Bilateral trade
Both countries are big business partners and the bilateral trade between the two is about $ 50 billion.
UAE is the sixth largest source of oil imports in India.
The exchange swap agreement between the two countries allows the concerned country to pay in the currency at a pre-determined exchange rate without interchanging the third standard currency such as the US Dollar for trade and import and export business.
Other information
With the UAE Foreign Minister, Swaraj will also inaugurate the Gandhi-Zayed Digital Museum in Abu Dhabi on the occasion of the centenary celebrations of Mahatma Gandhi's 150th birth anniversary and the birth anniversary of the founder of modern UAE Sheikh Zayed.
She will also have interaction with the Indian community in Abu Dhabi.
