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 Eurodollar deposit.

Features of Eurocurrency Market1. 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 market3. 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.

Advantages1. 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.