Eurodollars

Business, Legal & Accounting Glossary

Definition: Eurodollars


Eurodollars

Quick Summary of Eurodollars


An American dollar held by a foreign institution outside the U.S., usually a bank in Europe, often as a result of payments made to overseas companies for merchandise.



Video Guide For Eurodollars




What is the dictionary definition of Eurodollars?

Dictionary Definition


Eurodollar refers to all deposits denominated in US dollar/US dollars in banks outside the US. These deposits are not restricted to Europe, Asia, Latin America or for that matter, any particular country, but to any bank branch outside the geographical territory of the United States of America. Eurodollar does not imply a connection with Euro but is a term used for indicating a currency held in a country which is not its origin.

The Eurodollar not only plays a significant role in global capital markets but also serves as a yardstick for corporate funding interest rate/interest rates.

Deposits of Eurodollars are direct responsibilities of commercial banks accepting such deposits. These deposits are not guaranteed by any governments or government treasury. Being a low-risk investment option, Eurodollars are not totally risk-free. After 1981, deposits of Eurodollars have risen steadily. Trading in Eurodollar securities has also evolved as an important futures marketing activity. Movement of Eurodollar futures takes place in increments of 0.01 or US $25


Full Definition of Eurodollars


Eurodollars are large US Dollar deposits that are made in foreign bank accounts. Eurodollars can also be deposited within the US in an International Banking Facility by non-US residents and companies. Eurodollars emerged after World War II. Initially, Europe was the main market for eurodollars, hence the prefix “euro” in eurodollars. Although the market for eurodollars has evolved since then to include countries outside Europe, the bulk of eurodollars are still found in Europe, in particular London. Eurodollars are used in international trading and securities markets. The advantage of eurodollars is that they are not under the jurisdiction of the Federal Reserve or the SEC in the case of eurodollar securities (i.e. eurodollar bond). By exporting US deposits, as eurodollars, those deposits are subject to less regulation which tends to provide added benefit to the owner of eurodollars (i.e. better return). The US Dollar is not the only currency being deposited abroad to minimize regulatory costs. The eurosterling (i.e. deposits denominated in pound sterling), and the euroyen (i.e. deposits denominated in yen) are examples of currencies deposited outside of their country of origin.

Trading in Eurodollar securities

Eurodollar has emerged as a versatile instrument of trading securities. With its outstanding growth possibilities and adaptability, Eurodollar securities offer multiple trading opportunities.

Eurodollar bond

Eurodollar bonds, also termed Eurobonds, are a vital capital source for foreign governments and multinational corporations. Eurodollar though having its origin in London refers to all dollar deposits outside the USA. It is sometimes advantageous to invest in eurodollar bonds because:

  • there are lesser regulations in its trading and investing;
  • being unregistered with United States Securities and Exchange Commission, Euro bonds can be sold at comparatively lower rates than within the United States.

Examples of Eurodollars in a sentence


You need to make sure that you are getting a good rate any time you will be exchanging for the eurodollar.

Their investment strategy was heavy on the Eurodollar, and so far the payoff had worked well enough to quiet the critics for the time being.

The company has holdings in eurodollars through our bank which has a few branches in europe. We don’t have to be bothered with federal regulations when doing business in this manner.


Related Phrases


Interbank Rate
Eurodollar floating-rate certificate of deposit
London Inter-Bank Offer Rate
either-way market
LIBOR
neutral period
Eurodollar market
TED spread
Eurodollar market
Eurodollar certificate of deposit
Eurodollar bond
Eurodollar floating-rate certificate of deposit


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Definition Sources


Definitions for Eurodollars are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd November, 2021 | 0 Views.