Euro Dollar Market Essay

890 Words Mar 2nd, 2012 4 Pages
Running Head: GLOBAL FINANCING AND EXCHANGE RATE MECHANISMS

EURO CURRENCY MARKETS Name: Instructor: Course: Date:

Global Financing and Exchange Rate Mechanisms
“International financial markets are a major source of funds for international transactions. Most countries have recently internationalized their financial markets to attract foreign business”.
They include the banks that accept deposits and lend the loans in foreign currencies outside the country of issue. Globalization has enabled harmonization and reduction of
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The expansion of Euro dollars is enabled by; private and public depositors keeping their money outside the United States banks and private and public borrowers who take the Euro dollar loans.
The most borrowers in the Euro dollar market are governments and commercial banks, this has caused many foreign government to suffer loan related problems hence pressing the Euro dollars to improve their international reserves.
Many commercial banks have been have been relying mostly on the Eurodollars to make loans to the exporters and importers and domestic companies (Globalization Financial Markets, n.d.).
The Eurodollars funds have no restriction to their deployment and also have a very large market hence many institutions including countries prefer the funds due to its international reserve. Instruments
The Euro dollar instruments are of two types; Eurodollar deposits and Euro dollar loans.
Euro dollar deposits
They are either time deposits or negotiable certificates of deposits. For time deposits funds are placed in the banks a fixed time for maturity. The maturity time range from one day to one year, while negotiable certificates of deposits are negotiable receipt of funds left in the bank for a specified period at fixed or floating rate of interest (Globalization Financial Markets, n.d.).
The Euro dollar loans range from $500,000 to $100 million, short Euro dollar financing represent the major part of Euro dollar financing. Euro banks also provided

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