Payment Settlement Currency

Payment Settlement Currency refers to the currency agreed upon by the buyer and seller in an international trade contract for the payment of goods and final settlement. It directly affects transaction costs, exchange rate risks, and capital flow. Usage scenarios include: specifying the settlement currency (e.g., USD, EUR, RMB) at contract signing, and it must be designated under payment methods such as letters of credit and telegraphic transfers. Precautions: 1) Currency selection should consider mutual acceptability, exchange rate stability, and convertibility; 2) If the settlement currency differs from the buyer's local currency, a exchange rate lock-in mechanism or exchange rate risk sharing should be agreed upon; 3) Pay attention to restrictions on settlement currencies in countries with foreign exchange controls (e.g., some emerging markets); 4) It may differ from the Currency of Account, but they are usually the same. Difference: The settlement currency emphasizes the currency for actual payment and clearing, while the currency of account is used to calculate the contract amount; the two can be separated, but in practice they are often combined.