DEFINITION of 'Cross-Currency Transaction'

A cross-currency transaction is one which involves the simultaneous buying and selling of two or more currencies. An example is the purchase of Canadian dollars with yen and the simultaneous sale of yen for U.S. dollars. The term is also used generically for any transaction that involves more than one currency, such as a currency swap.

BREAKING DOWN 'Cross-Currency Transaction'

Cross currency transactions are most common for multinational corporations or international bond funds that manage or hedge their currency exposure. Sometimes all the transactions are effected in one country without the use of that country's currency, which is referred to as a currency cross.

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RELATED FAQS
  1. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
  2. What are the benefits of engaging in a currency swap?

    Read about the benefits of engaging in a currency swap, such as when companies in different countries want to borrow funds ... Read Answer >>
  3. Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Answer >>
  4. How often do exchange rates fluctuate?

    Exchange rates float freely against one another, which means they are in constant fluctuation. Currency valuations are determined ... Read Answer >>
  5. Why is currency always quoted in pairs?

    When reading currency quotes, you have probably noticed that there is only a single quote for a pair of currencies. Currency ... Read Answer >>
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    In a currency pair, the first currency in the pair is called the base currency and the second is called the quote currency. ... Read Answer >>
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