What swap is for
The need for swaps is explained by the nature of foreign exchange trading. The person who is selling the currency needs to physically deliver it on the next trading day to the one buying it. But what do you do if the position has not been closed for several days? To avoid physical delivery of currency when a position is held open overnight for trading the following day, it gets closed and then one is opened at new market prices. No changes are virtually made to the trading position in the trader’s account, only the swap amount is either credited to or debited from it.