With reference to Dollar Swap Arrangement consider following statements It is a kind of cu...........

Economic Affairs Balance of Payments

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With reference to Dollar Swap Arrangement, consider following statements

It is a kind of currency swap between the two countries in an agreement to exchange currencies with predetermined terms and conditions.
It help the Central banks and Governments to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis.
It includes foreign currencies, bonds, treasury bills and other government securities.

Select the correct statement.

1&2 only

2&3 only

1&3 only

All of the above

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Explanation:

Recently, India is working with the United States to secure a dollar (currency) swap line that would help in providing an additional comfort in an event of any abrupt outflow of funds.

Dollar Swap Arrangement

Dollar swap is a kind of currency swap. The word swap means exchange.
A currency swap between the two countries is an agreement to exchange currencies with predetermined terms and conditions.
The US Federal Reserve will provide dollars to a foreign central bank. At the same time, the foreign central bank provides the equivalent amount of funds in its currency to the Fed, based on the market exchange rate at the time of the transaction.
The Central banks and Governments engage in currency swaps with foreign counterparts to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis till longer arrangements can be made.
It includes foreign currencies, bonds, treasury bills and other government securities.It is part of Forex Reserve not Dollar swap. Hence statement 3rd is incorrect.