Euro Dollar

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Transcript of Euro Dollar

Page 1: Euro Dollar
Page 2: Euro Dollar

EURODOLLARSEURODOLLARS

Made byMade byAnhar Alam (0810-BBA06)Anhar Alam (0810-BBA06)

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EURODOLLARSEURODOLLARS• Eurodollars are time

deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve.

• An American dollar held by a foreign institution outside the U.S., usually a bank in Europe, often as a result of payments made to overseas companies for merchandise.

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EURODOLLARSEURODOLLARS

• Many contracts around the world call for the payment of U.S dollars due to the dollar’s stability.

• Many multinational companies

and governments choose to

hold dollars.• After World War II most of these

deposits were held in

New York money center banks.

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Stability of DollarStability of Dollar

• Eurodollar market has continue to grow rapidly.

• The primary reason is that depositors receive higher rate of return on a dollar deposit in the Eurodollar market than in the domestic market.

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London Interbank MarketLondon Interbank Market

• Some large London banks act as brokers in the interbank Eurodollar market.

• Eurodollar are an alternative to FED funds.

• Banks from around the world buy and sell overnight funds in this market.

• Many banks participate in this market, it is extremely competitive.

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London Interbank MarketLondon Interbank Market London interbank bid rate (LIBID):-• The London Interbank Bid Rate (LIBID) is a bid rate; the

rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is "the opposite" of the LIBOR.

London interbank offer rate (LIBOR):-• An interest rate at which banks can borrow funds, in

marketable size, from other banks in the London interbank market.

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Eurodollar Certificate of Eurodollar Certificate of depositdeposit

• A certificate of deposit denominated in U.S. dollars, but issued and held outside the United States. Almost all Eurodollar certificates of deposit are issued by banks in London.

• Eurodollar are time deposit with fixed maturities.

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