Euromarkets or offshore markets are credit markets that operate in countries other than those to which the currency in whose currency their transactions are made, avoiding all kinds of control by the national monetary authorities. In practice, they only include strong and convertible currencies, which are the subject of operations outside their issuing country.
The Euromarkets meant a renewal of the international financial markets. These markets make it possible to avoid the jurisdiction of the governments of the countries involved, since it is located in the credit market of a specific currency outside the country to which the currency belongs.
To these offshore markets the qualification “euro” is applied because the main banking entities that operate in them are located in the most important financial squares of the old continent.
At its birth, the prefix “euro” was deposited in the banks of Europe. Today, that prefix includes any possible destination, although only applied to strong currencies. The existence of a Eurocurrency market means making investment – financing decisions, in different currencies, without the need to operate in different monetary centers.
Currencies, like other assets, have crossed their traditional borders:
- Bank accounts in different currencies exist in any financial center
- USD check can be issued against accounts located in Tokyo
- A loan in Euros can be negotiated in Manila …
All these instruments are called deposits and loans in Eurocurrencies or EuroMarket currencies. The creation of a deposit in Eurocurrencies arises when a multinational bank accepts a deposit denominated in a currency other than that of the country in which it is located.
For example, a German company sells a car to a US citizen for 40,000USD. Said citizen pays with a check on his Citibank account. The company collects the check and must decide where to put that money. If you do not need the dollars you can keep them in an account that generates interest. The alternatives are:
- Buy US Treasury bills
- Buy certificates of deposit issued by US banks
- Buy a deposit in Eurodollars by depositing the check in a Eurobank
Therefore, Eurodollars are US dollars traded outside the US. and its name is because a high percentage of these are dollars used as a means of payment in Europe.