How transactions in foreign currencies are settled depends on the agreement a merchant has with their acquiring bank.
Payments may be settled in the same currency used in the transaction (the transaction currency). This allows merchants to manage their exchange rate risk, as they may use the funds for outgoing payments in the same currency or exchange them only when conditions satisfy business requirements.
Alternatively, merchants can opt to have foreign currency transactions settled in a specified currency (the settlement currency). This arrangement is suitable e.g. where the merchant has no outgoing payments in the transaction currency and where the exchange rate between two currencies does not fluctuate much.
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