Euro dollar
Dealing in foreign exchange inevitably require some amount of knowledge about money markets. In reality, the borderline between money market and foreign exchange markets is getting thinner, because the operation of the foreign exchange market quite often takes us to the money market. For instance, selling a currency forward may involve buying it in the spot market and depositing in the money market at London or Paris or wherever it is found convenient for security and yield. Emergence of Euro-currency since the late fifties has added new dimensions as well as greater depths to international money market.
Euro Currency, Euro-dollar.
It is important to make clear at the outset that Euro-currency are not European currencies as the name seems to suggest,. Nor it must be thought that Europe is the only place where this market for Euro-currency exists. Euro-currency are the collective name for Euro-dollar, Euro-sterling, and Euro-yen etc. The term Euro is a legacy from the 1950s when these so-called Euro-currencies, especially Euro-dollar, made their appearance in the money market in Europe.
When we talk about say, Euro-dollar, it must be remembered that it is the real U.S dollar ; that is, the ordinary US dollar which we keep as deposits with banks in the USA. Like the Holy Roman which was neither holy, nor Roman, nor an empire the so-called Euro-dollar market is neither European nor a market for dollars. Nor is the Euro-yen domiciled in Europe, it is the ordinary Japanese yen that does not owe its origin to Europe.
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