“International transaction”

definition

An international transaction is a money transfer (often as part of a business deal) that crosses national borders, frequently involves two different currencies, and can even involve three currencies if a reserve currency, such as the US dollar is used.

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International transactions for businesses

For example, a German company needs to buy materials from a supplier in the U.S. The supplier only accepts payments in U.S. dollars so the business in Germany changes euros into U.S. dollars, to pay the supplier.

The same German-based company also buys equipment from a Chinese supplier. The Chinese company operates in yuan renminbi, which is not a freely convertible currency. To complete the transaction, the parties use the U.S. dollar as a reserve currency. The German company executes a foreign currency transaction, that involves exchanging changes euros into U.S. dollars and the Chinese supplier then accesses these funds.

Transactions within monetary unions, such as the Eurozone, are exceptional sorts of international payment. When a company from one Eurozone country trades with a company in another member country, there is no need to exchange currencies as they both use the euro.