Eurocurrency
Encyclopedia
Eurocurrency is the term used to describe deposits residing in banks that are located outside the borders of the country that issues the currency the deposit is denominated in. For example a deposit denominated in US dollars residing in a European bank is a Eurocurrency deposit, or more specifically a Eurodollar
deposit.
The origin of the Eurocurrency market can be traced back to the 1950s and early 1960s, when the former Soviet Union and Soviet-bloc countries sold gold and commodities to raise hard currency. Because of anti-Soviet sentiment, these Communist countries were afraid of depositing their U.S. Dollar in U.S. Bank for fear that the deposits could be frozen or taken. Instead they deposited their dollars in a French bank whose telex address was EURO-BANK.Since that time, dollar deposits outside the U.S. have been called Eurodollar and bank accepting Eurocurrency deposits have been called Eurobank.
Key points are the location of the bank and the denomination of the currency, not the nationality of the bank or the owner of the deposit/loan.
The four main Eurocurrencies are the US dollar, the Eurozone euro, the British pound and the Japanese yen; the currencies of the major economies of the world.
Today the Eurocurrency and Eurobond
markets are active for the reason that they avoid domestic interest rate regulations, reserve requirements and other barriers to the free flow of capital (Butler, 2004, pp. 62–63).
Eurodollar
Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the U.S., allowing for higher margins. The term...
deposit.
The origin of the Eurocurrency market can be traced back to the 1950s and early 1960s, when the former Soviet Union and Soviet-bloc countries sold gold and commodities to raise hard currency. Because of anti-Soviet sentiment, these Communist countries were afraid of depositing their U.S. Dollar in U.S. Bank for fear that the deposits could be frozen or taken. Instead they deposited their dollars in a French bank whose telex address was EURO-BANK.Since that time, dollar deposits outside the U.S. have been called Eurodollar and bank accepting Eurocurrency deposits have been called Eurobank.
Key points are the location of the bank and the denomination of the currency, not the nationality of the bank or the owner of the deposit/loan.
The four main Eurocurrencies are the US dollar, the Eurozone euro, the British pound and the Japanese yen; the currencies of the major economies of the world.
Today the Eurocurrency and Eurobond
Eurobond
A Eurobond is an international bond that is denominated in a currency not native to the country where it is issued. It can be categorised according to the currency in which it is issued. London is one of the centers of the Eurobond market, but Eurobonds may be traded throughout the world - for...
markets are active for the reason that they avoid domestic interest rate regulations, reserve requirements and other barriers to the free flow of capital (Butler, 2004, pp. 62–63).