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. What bond indexes follow the supply and demand for junk bonds?

    Bond indexes that track junk bonds include the Merrill Lynch High Yield Master II Index and the S&P U.S. High Yield Corporate ... Read Full Answer >>
  2. Why are the term structure of interest rates indicative of future interest rates?

    The term structure of interest rates is influenced by the expectations for future yields and interest rate risk according ... Read Full Answer >>
  3. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  4. How stable are municipal bonds?

    Stability is relative in the municipal bond market. Municipal bonds tend to be safer than many other types of investments, ... Read Full Answer >>
  5. What are the differences between debt and equity markets?

    The basic differences between the debt and equity markets include the type of financial interest they represent, the way ... Read Full Answer >>
  6. What is the difference between the equity market and the fixed income market?

    The major differences between equity and fixed income markets are the way they make profits for investors, the manner in ... 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. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Barclays 20+ Year Treasury Bond

    Learn about the iShares 20+ Year Treasury Bond ETF (TLT). TLT is a very liquid ETF with low costs that allow investors to gain exposure to treasuries.
  10. Investing

    Five Portfolio Moves For The Second Half

    After a relatively calm few months, market volatility is back. If you are an investor, we help you prepare your portfolio with these five portfolio moves.

You May Also Like

Hot Definitions
  1. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  3. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  4. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  5. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
  6. Himalayan Option

    An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of ...
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!