Meaning of Eurocurrency: Currency deposited by national governments or corporations in banks outside their home market. This applies to any currency and to banks in any country. For example, South Korean won deposited at a bank
in
South
Africa,
is
considered
eurocurrency.
Also known as "euromoney". 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).
Having "euro" doesn't mean that the transaction has to involve European countries. However, in practice, European countries are often involved. What Does Eurobank Mean? A
financial
institution
that
readily
accepts
foreign
currency
denominated deposits and makes foreign currency loans.
What Does Eurobond Mean? A bond issued in a currency other than the currency of the country or market in which it is issued. Usually, a eurobond is issued by an international syndicate and categorized according to the currency in which it is denominated. A eurodollar bond that is denominated in U.S. dollars and issued in Japan by an Australian company would be an example of a
eurobond. The Australian company in this example could issue the eurodollar
bond
in
any
country
other
than
the
U.S.
Eurobonds are attractive financing tools as they give issuers the flexibility to choose the country in which to offer their bond according to the country's regulatory constraints. They may also denominate their eurobond in their preferred currency. Eurobonds are attractive to investors as they have small par values and high liquidity. What Does Eurodollar Mean? U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board. Originally, dollar-denominated deposits not subject to U.S. banking regulations were held almost exclusively in Europe; hence the name eurodollars. These deposits are still mostly held in Europe, but they're also held in such countries as the Bahamas, Canada, the Cayman Islands, Hong Kong, Japan, the Netherlands Antilles, Panama, and Singapore. Regardless of where they are held, such deposits are referred as Eurodollar. Since the eurodollar market is relatively free of regulation, banks in the eurodollar market can operate on narrower margins than banks in the United States. Thus, the eurodollar market has expanded largely as a means of avoiding the regulatory costs involved in dollardenominated financial intermediation.
Eurocurrency is money in the form of bank deposits of a currency outside the country that issued the currency. The use of the prefix "euro" is somewhat misleading. It is used for historical reasons. Eurocurrency deposits may be of any currency in any country. The most common currency deposited as eurocurrency is the US dollar, and the term Eurodollar is often used to refer to dollar deposits. One advantage of eurocurrency from a bank's point of view is that it allows a bank to operate outside the regulation of the country issuing the currency in question. One particular advantage is that most countries do impose a reserve requirement on foreign currency operations: a bank can therefore lend a higher proportion of its eurocurrency deposits, improving its interest margin. It also makes sense for a bank that has customers who wish to hold or borrow foreign currency the convenience of doing so in their own country. Sufficiently large borrowers often issue eurobonds instead of borrowing from banks' eurocurrency operations.
