Eurocurrency is any 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 banks accepting Eurocurrency deposits have been called Eurobanks.
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).
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