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Eurodollars

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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.



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