DEFINITION of 'Dual Currency Bond'

A debt instrument in which the coupon and principal payments are made in two different currencies. The currency in which the bond is issued, which is called the base currency, will be the currency in which interest payments are made. The principal currency and amount are fixed when the bond is issued.

BREAKING DOWN 'Dual Currency Bond'

Dual currency bonds are subject to exchange rate risk. If the currency in which the principal will be repaid appreciates, the bondholder will make money; if it depreciates, he or she will lose money. Investors can use dual currency swaps, which have a fixed exchange rate at issuance, to offset the exchange risk of dual currency bonds.

RELATED TERMS
  1. Dual Currency Issue

    A bond that pays interest in one currency but pays the principal ...
  2. Dual Currency Swap

    A currency swap used to hedge the risk associated with the issuance ...
  3. Dual Currency Service

    A forex trading service that allows an investor to speculate ...
  4. Dual Pricing

    The practice of setting prices at different levels depending ...
  5. Currency

    Currency is a generally accepted form of money, including coins ...
  6. Foreign Currency Convertible Bond ...

    A type of convertible bond issued in a currency different than ...
Related Articles
  1. Investing

    Spice Up Your Portfolio With International Bonds

    Going global can add flavor and diversity to an otherwise bland basket of bonds.
  2. Trading

    What Happens in a Currency Crisis?

    A currency crisis comes from a decline in the value of a country’s currency.
  3. Investing

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
  4. Trading

    Hedging With Currency Swaps

    The wrong currency movement can crush positive portfolio returns. Find out how to hedge against it.
  5. Investing

    How Does A Bond’s Coupon Interest Rate Affect Its Price?

    All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
  6. Financial Advisor

    Using Excel PV Function to compute Bonds PV

    To determine the value of a bond today - for a fixed principal (par value) to be repaid in the future at any predetermined time - we can use an Excel spreadsheet.
  7. Trading

    The Effects Of Currency Fluctuations On The Economy

    Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. The exchange rate of one currency versus the other is influenced by ...
RELATED FAQS
  1. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
  2. Are high-yield bonds better investments than low-yield bonds?

    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will ... Read Answer >>
  3. What are the key factors that will cause a bond to trade as a premium bond?

    Learn about the primary factor that can cause bonds to trade at a premium, including how national interest rates affect bond ... Read Answer >>
  4. What is accrued interest, and why do I have to pay it when I buy a bond?

    A bond represents a debt obligation whereby the owner (the lender) receives compensation in the form of interest payments. ... Read Answer >>
  5. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
Hot Definitions
  1. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  2. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  5. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
  6. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
Trading Center