Eurocurrency Market Essay

1030 WordsFeb 22, 20135 Pages
Eurocurrency Market Josh Van Kampen FIN 366 Leon Sears Feb 11, 2013 Introduction The global financial market fabric is woven together by multiple layers of financial institutions, market places, economic policies, international consortiums, laws, and currencies. This paper will discuss primarily the Eurocurrency market, or known as Eurocurrency, and the effect of the currency on US growth, banking and how the currency contributes to global economic stability. The Eurocurrency market was established or took root during the World War Era, to establish a means that government and business could deposit international money. The Eurocurrency main influential rate basis point is the American dollar, as the majority of global assets are backed by US currency (Wise Geek). The federal government and international company’s use and deposit European currency in banks located not only the United States but globally. The Eurocurrency market is at times confused with the foreign exchange market, however they are quite differently. The Eurocurrency market is a market in which transaction of selling and buying of European currency occurs, but rather a market in which deposits and loans occur in European currency. The concept is a money market that will provide banking services to customers by using European currency outside of their home country. For example, a Canadian dollar is deposited in an American bank; this is considered using the Eurocurrency market. The way the Eurocurrency market operates is through offering public prices of interest rates; the bid and ask rate. The rate in which the financial institution is willfully borrowing money is called the bid rate, whereas the rate in which the financial institution is lending the money is called the ask rate. A term commonly known as the spread is used to determine or talk about the difference

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