Eurodollar

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DEFINITION of 'Eurodollar'

U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board.

BREAKING DOWN 'Eurodollar'

Originally, dollar-denominated deposits not subject to U.S. banking regulations were held almost exclusively in Europe; hence the name eurodollars. These deposits are still mostly held in Europe, but they're also held in such countries as the Bahamas, Canada, the Cayman Islands, Hong Kong, Japan, the Netherlands Antilles, Panama and Singapore. Regardless of where they are held, such deposits are referred to as eurodollars.

Since the eurodollar market is relatively free of regulation, banks in the eurodollar market can operate on narrower margins than banks in the United States. Thus, the eurodollar market has expanded largely as a means of avoiding the regulatory costs involved in dollar-denominated financial intermediation.

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RELATED FAQS
  1. Are eurodollars related to the currency called the euro?

    Eurodollars have little to do with the official currency of the European Union, the euro (EUR). In 1999, the euro was implemented ... Read Full Answer >>
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    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
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