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Foreign Exchange Swaps

Critics Say Currency Markets Hold Significant Risk

Sometime soon, the Treasury Department will make a seemingly obscure determination about how to regulate the $4-trillion-per-day market in “swaps” used to hedge against swings in currency values. The issue at hand: Does a shadow market for these derivatives pose risks similar to those of the credit-default swaps that nearly destroyed Wall Street in 2008? The agency has already signaled it thinks the answer is no, and bank executives insist that the currency markets performed well throughout the crisis.