Dual Currency Bond

AAA

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.

INVESTOPEDIA EXPLAINS '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. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  4. Dual Currency Swap

    A currency swap used to hedge the risk associated with the issuance ...
  5. Dual Currency Issue

    A bond that pays interest in one currency but pays the principal ...
  6. Eurobond

    A bond issued in a currency other than the currency of the country ...
RELATED FAQS
  1. Where can I find year-to-date (YTD) returns for benchmarks?

    Benchmarks are securities or groups of securities against which investment performance is analyzed. Examples of popular equity ... Read Full Answer >>
  2. What types of investments are allowed in a provident fund?

    Different provident funds have different investment rules and restrictions. The allowable investments in an Indian provident ... Read Full Answer >>
  3. How do I evaluate a debt security?

    Debt securities are a form of loan from an investor to the government or a business. Among the many different types of debt ... Read Full Answer >>
  4. How does the effective interest method treat the interest on a bond?

    The effective interest method is used when evaluating the interest generated by a bond because it considers the impact of ... Read Full Answer >>
  5. What happens to the price of a premium bond as it approaches maturity?

    The price of a premium bond will decrease toward par value as the bond approaches maturity. Premium Bonds Vs. Discount Bonds All ... Read Full Answer >>
  6. What are the key factors that will cause a bond to trade as a premium bond?

    The primary factor that causes bonds to trade at a premium is the fluctuation of interest rates. How Bonds Work: The Simple ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Evaluating Country Risk For International Investing

    Investing overseas begins with determining the risk of the country's investment climate.
  2. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  3. Bonds & Fixed Income

    The Advantages Of Bond Swapping

    This technique can add diversity to your portfolio and lower your taxes. Find out how.
  4. Options & Futures

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  5. Forex Education

    Intermarket Relationships: Following The Cycle

    Find out how commodity, bond, stock and currency markets interact.
  6. Bonds & Fixed Income

    5 Basic Things To Know About Bonds

    Learn these basic terms to breakdown this seemingly complex investment area.
  7. Bonds & Fixed Income

    Does International Investing Really Offer Diversification?

    Historically, international investing has worked out well for investors, but this may no longer be the case.
  8. Economics

    What's a Maturity Date?

    Maturity date is the final date when any remaining principal and any unpaid interest are due on a debt.
  9. Professionals

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  10. Stock Analysis

    Playing Rising Rates with Ultra-Short Term Bonds

    With rising rates likely, investors may want to consider adding a dose of ultra-short bonds to their portfolios. Here are some ETFs to consider.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!