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Eurodollars are deposits denominated in United States dollar 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 United States, allowing for higher margins. This article is about general United States currency. ...
The Bank of Taiwan in Taipei , Republic of China (Taiwan). ...
In law, jurisdiction from the Latin jus, juris meaning law and dicere meaning to speak, is the practical authority granted to a formally constituted body or to a person to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility. ...
The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. ...
Historically, such deposits were held mostly by European banks and financial institutions, and thus became known as "eurodollars". As of April 2006, China holds the largest foreign exchange reserves, much of which are denominated in US currency. Such deposits are now available in many countries worldwide, but they continue to be referred to as "eurodollars" regardless of the location. World map showing Europe Political map Europe is one of the seven continents of Earth which, in this case, is more a cultural and political distinction than a physiographic one, leading to various perspectives about Europes borders. ...
In Financial economics, a financial institution acts as an agent that provides financial services for its clients. ...
The term eurodollar is some times confused with the joint European currency, the Euro. The euro (currency sign: €; banking code: EUR) is the official currency of the European Union and single currency for over 300 million Europeans in the following twelve European Union member states: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain; collectively also known as the...
History Gradually, after the Second World War, the amount of US Dollars outside the United States increased enormously, both as a result of the Marshall Plan and as a result of imports into the U.S., which had become the largest consuming market after peace was reestablished in Europe. Mushroom cloud from the nuclear explosion over Nagasaki rising 18 km into the air. ...
This article is about general United States currency. ...
Map of Cold-War era Europe showing countries that received Marshall Plan aid. ...
World map showing Europe Political map Europe is one of the seven continents of Earth which, in this case, is more a cultural and political distinction than a physiographic one, leading to various perspectives about Europes borders. ...
As a result, enormous sums of US Dollars were in custody of foreign banks outside the United States. Some foreign countries, including the Soviet Union, also had deposits in U.S. dollars in American banks, granted by certificates. This article is about general United States currency. ...
During the Cold War period, especially after the invasion of Hungary in 1956, the Soviet Union feared that its deposits in North American banks would be frozen as a retaliation. A British bank offered the Soviets the possibility of receiving its US Dollar reserves as deposits, outside the USA.[citation needed] The British bank would then deposit that money in the US banks. There would be no chance of confiscating that money, because it belonged to the British bank and not to the Soviets. This operation was considered the first to create the so-called "eurodollars". The Cold War was the protracted geopolitical, ideological, and economic struggle that emerged after World War II between the global superpowers of the Soviet Union and the United States, supported by their military alliance partners. ...
Gradually, as a result of the successive commercial deficits of the United States, the eurodollar market expanded worldwide.
Futures Contract At the same time, eurodollar refers to the financial futures contract based upon these deposits. Traded at the Chicago Mercantile Exchange (CME) in Chicago, the contract has a notional or 'face value' of $1,000,000, though the leverage used in futures allows one to trade a contract for just hundreds of dollars. Trade in Eurodollar futures is extensive, thus offering uniquely deep liquidity. A purchase or sale is, in effect, a bet on U.S. short-term interest rates. Prices are quite responsive to Fed policy, inflation, and other economic indicators. The price of a Eurodollar futures contract is equal to 100 minus the yield (interest rate) for the given future date. Thus, a price of 95 would imply a 5% yield on the Eurodollar deposit. If you believe that interest rates will fall, you would then buy a Eurodollar contract (and vice versa; if you believe rates will rise, you would sell a Eurodollar contract). Each "tick" (.005) on the price of a Eurodollar contract is worth $12.50 (i.e., a move from 95.01 to 95.015). Eurodollar futures can be traded by implementing a spread strategy among multiple contracts to take advantage of movements in the forward curve for future pricing of interest rates. In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a pre-set price. ...
Finance In finance, the prefix "euro" as in "eurodollars" or "euroyen" refer to currency deposited outside the country of their origin.
Eurodollars are time deposits denominated in United States dollars at banks headquartered outside the United States, or in foreign branches of banks headquartered within the United States. There is nothing "European" about Eurodollar deposits; a US dollar-denominated deposit in Tokyo or Caracas would likewise be deemed Eurodollar deposits. Such deposits are normally in excess of $1,000,000, and typically (although not exclusively) involve deposits placed by one financial institution with another financial institution. As such, the Eurodollar rate is reflective of a large bank's cost of funds. Trading is extensive and quite active, particularly in maturities ranging from one day to six months; there is some very light trading that may run out as far as five years. Deposit may refer to: Finance A deposit is a specific sum of money taken and held on account, by a bank as a service provided for its clients. ...
Although paid on deposits booked elsewhere in the world, the Eurodollar rate is driven primarily by the American economy (because it represents an interest rate paid on US dollar-denominated deposits). By and large, when the Fed tightens (or is expected to tighten within the lifetime of the deposit) the Eurodollar rate goes up, and when the Fed eases (or is expected to ease) the Eurodollar rate goes down.
In addition, the interest rate on Eurodollar deposits can and does vary throughout the day in response to supply and demand. This can be problematic for market participants who seek to use Eurodollar rates as benchmarks. The LIBOR rate and other similar rates were therefore developed for that purpose, representing a snapshot of the Eurodollar market in a specific locality and point in time (11:00 a.m. in London in the case of LIBOR). LIBOR stands for the London Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale (or interbank) money market. ...
Eurodollar rates should not be confused with the currency called the euro, which is the common currency of some members of the European Union. Prior to the introduction of this currency, traders in Eurodollars would colloquially refer to them as "Euros", but because one cannot distinguish orally between capital and lower case letters, this practice has diminished. The euro (currency sign: €; banking code: EUR) is the official currency of the European Union and single currency for over 300 million Europeans in the following twelve European Union member states: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain; collectively also known as the...
The market for Eurodollar futures has grown to be highly liquid with the introduction of online trading.
See also The Euro A petroeuro is a petroleum trade valued in the euro as opposed to the US dollar (a petrodollar). ...
The Eurozone (also called Euro Area, Eurosystem or Euroland) is the subset of European Union member states which have adopted the euro, creating a currency union. ...
Currently there are several currencies pegged to the euro, some with fluctuation bands around a central rate and others with no fluctuations allowed around the central rate. ...
Bibliography - RATTI, B. Comércio Internacional e Câmbio. 9ª Edição. São Paulo, Brazil, Edições Aduaneiras, 1997
- SANDRONI, P. Novíssimo
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