International Currency: What does it mean to be one?

An international currency is a currency used to settle cross-border transactions involving any purchase of goods, services, or financial assets instead of the national currencies of the parties involved. An international currency has wide global recognition and is easily convertible into other currencies. While cross-border trade can be in any currency, the wide acceptability of an international currency makes it a popular medium of exchange.
International currencies gain recognition due to varied factors and the status is primarily a reflection of the trust in the currency and the parent economy. The British Pound Sterling gained prominence as a widely accepted currency for international trade during the colonial period. The US Dollar, on the other hand, emerged as the most widely used currency for international trade after an agreement at the Bretton Woods Conference in 1944 to use it as the world’s reserve currency.
One of the most commonly accepted international currencies include the US Dollar with a global daily average trading volume of about $6.6 trillion followed by the Euro, the second most traded currency constituting a daily average trading volume of almost $2.3 trillion. The Japanese Yen and the British Pound Sterling rank a distant third and fourth with trading volumes at $1.2 trillion and $968 billion, respectively. Over the course of the last few decades, China’s rising dominance as a global player is commensurate with the Chinese government’s efforts to promote the Chinese Yuan or Renminbi as a global trading currency. As a result, the currency has emerged as the fifth most traded currency in the world with an average of $526 billion in daily trading volume.