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What Is Eurocurrency

Eurocurrency refers to bank deposits denominated in a currency that is not issued by the country where the bank is located. For example, a US dollar deposit in a Japanese bank is a Eurocurrency deposit. The Eurocurrency market is an international money market that is not under any single national control. It deals in short-term deposits, usually with maturities between 1 day to several months. Transactions are large, usually over $1 million, making it a wholesale market. The Eurocurrency market is highly competitive and responsive to changes in demand, supply, and interest rates between countries. It has helped economies address liquidity issues and provided new investment opportunities, facilitating international trade and globalization. However, some economies

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62 views5 pages

What Is Eurocurrency

Eurocurrency refers to bank deposits denominated in a currency that is not issued by the country where the bank is located. For example, a US dollar deposit in a Japanese bank is a Eurocurrency deposit. The Eurocurrency market is an international money market that is not under any single national control. It deals in short-term deposits, usually with maturities between 1 day to several months. Transactions are large, usually over $1 million, making it a wholesale market. The Eurocurrency market is highly competitive and responsive to changes in demand, supply, and interest rates between countries. It has helped economies address liquidity issues and provided new investment opportunities, facilitating international trade and globalization. However, some economies

Uploaded by

Ashish Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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What is Eurocurrency?

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 Japanese bank is a Eurocurrency
deposit, or more specifically a

Features of Eurocurrency
Market

1. It is an international market and it is under no


national control: It has come up as the most
important channel for mobilizing and
deploying funds on an international scale.
2. It is a short term money market
3. Eurodollar markets are the time-deposit market.
The deposits here have a maturity period ranging
one day to several months. Eurodollar is the
short- term deposit. It is a wholesale market:
It is so because Eurodollar is the currency that
is
dealt in only large units.
Size of individual transaction is usually above
$1million.

4. It is highly competitive and sensible


market:
High competitive: This market is
characterized as highly competitive
because the market is growing and
accepted internationally.
Sensible: The Eurodollar market is said to
be sensible because it responds faster to
the changes in demand and supply of the
funds and also reacts to changes in the
interest rates.

Advantages
1. It helped the economies to solve the
liquidity problems.
2. It provided better investment opportunities.
3. Funds are also by the commercial banks of
various countries for domestic credit
creation and window dressing.
4. This facilitated the growth and
development of various countries like
Brazil, South Korea, Taiwan, and Mexico etc
5. Its International acceptance has helped in
the international trade to expand and
accelerated the process of globalization.

Disadvantages
For many economies it is a new concept.
For many economies also considered that the

speed of its growth or expansion is TOO fast.


For many economies, they feel this market gives

a chance to avoid many a regulations that they


try to impose on their national money market.

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