It permits companies that have funds in different currencies to manage them efficiently.
Forward foreign exchange transactions occur if both companies have a currency the other needs.
The interest collected or paid every night is referred to as the cost of carry.
As currency traders know roughly how much holding a currency position will make or cost on a daily basis, specific trades are put on based on this; these are referred to as carry trades.
Thus, the value of the swap points is roughly proportional to the interest rate differential.