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Spot FX trades settle two business days after the trade date. (The exception to this is the Canadian Dollar, which settles in one business day). The settlement delay is necessary to give each party enough time to initiate payment of the amounts owed to the counterparty. As a rule, the delay has to be the same number of days in either currency. If the normal settlement day is a legal holiday in country B but not in country A, then settlement will be pushed forward by one business day for both sides of the trade: settlement in country B will be 2 business days (plus 1 holiday) after the trade, while settlement in country A will be 3 business days after the trade.

Holiday treatment: July 4th is a US holiday. Assume that it falls on a Wednesday. On Monday, we will trade for Thursday settlement. On Tuesday, we will trade for Friday settlement, and on Wednesday (assuming we are not living in the US and enjoying the holiday), we will again trade for Friday settlement.

Cross Quotes and Holidays
When there is a holiday in the US, and we trade a cross such as EUR-JPY, we can theoretically settle both currencies on a US holiday. However, given the fact that most crosses trade via the USD, these kinds of settlements are usually avoided and you will find that many market makers will refuse to quote crosses for delivery on a US holiday.

There are certain countries in which Saturday is, technically, a legal settlement day, i.e. payments can settle on a Saturday. For purposes of FX trading, Saturday is usually not considered a valid settlement day.

There is, however, a practice known as “split settlement”. Suppose we wanted to trade Saudi Riyal (SAR) against USD for Friday delivery. Friday is the weekly holiday in Islamic countries, and no payments are made. We can opt for “split settlement” where the USD would settle on Friday and the SAR would settle on Saturday.

Also, technically, if we traded, for example, SAR vs. Kuwaiti Dinar, settlement for both countries could take place on Saturday.

In practice, though technically feasible, these types of settlements are not market practice. Moreover, most IT systems cannot handle split settlement or Saturday settlement.