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"A purchase or sale is, in effect, a bet on U.S. short-term interest rates. Prices are quite responsive to Fed policy, inflation, and other economic indicators.
CME Eurodollar futures prices are determined by the market’s forecast of the 3-month London Interbank Offered Rate (LIBOR)."
May be one should have said instead "the price of the eurodollar is responsive to the SPREAD between the 3-month LIBOR and 3-month T-Bill" ? —Preceding unsigned comment added by 126.96.36.199 (talk • contribs) 19:00, 1 June 2007
The price of a Eurodollar futures contract defined by the forecast of USD 3M LIBOR in the future. It is not the spread between LIBOR and Treasury bill rates, but the full LIBOR rate itself, that is used. And, even though it is the London Inter-Bank Offered Rate, it is still a short-term rate on USD deposits. Thus the statement that it is U.S. short-term rates that matter is correct. 188.8.131.52 14:27, 11 August 2007 (UTC)
Definitely not contradictory Brettman9 04:17, 19 August 2007 (UTC)
I quote Paper Money , by “Adam Smith”, Futura edition of 1982, page 122:-
‘On February 28, 1957, the Moscow Narodny Bank in London put out to loan through a London merchant bank, the sum of $800,000. This miniscule amount was borrowed and repaid outside the American banking system. The Soviets also owned a bank in Paris, called the Banque Commercial pour l’Europe du Nord, whose telex address was “Eurbank”. The Paris Russian bank took some Narodny dollars and lent them; the dollars were known as Eurbank dollars, and finally Eurodollars.’
Joseph B. Fox 17:19, 23 August 2007 (UTC)
The early growth of the eurodollar market
The eurodollar market was inadvertently given two helping hands by the American authorities in the early ‘sixties. Firstly, the Federal Reserve Board, in an attempt to curb monetary growth, imposed onerous regulations on banks operating within the United states: raising the level of non-interest bearing deposits to be held at the Fed, capping interest rates banks could pay, etc. Banks outside of America were immune from these burdens, and could thus go about the business of borrowing and lending dollars more profitably than those within America.
Secondly, Congress passed the Exchange Equalisation Act, whose purpose was to stem the flow of dollars to more lucrative investment homes abroad. It had the perverse effect of encouraging American corporations to set up subsidiaries in tax-havens such as the Netherlands Antilles, through which they would borrow billions of dollars in the City of London, the birthplace and still the home of the Eurodollar. Joseph B. Fox 18:14, 25 August 2007 (UTC)
US TREASURY/CONGRESS JURISDICTION
"Eurodollars are deposits denominated in United States dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the United States, allowing for higher margins."
This is true - in and of itself - but the article fails to acknowlege the fact that both the banks - and the Fed - depend on the jurisdiction held by both the US Treasury, and the US Congress. If either or both step in and exercise their constitutionally mandated jurisdiction, they can certainly affect how successful either the Fed or the Banks manipulate the Dollar. - 184.108.40.206 22:17, 25 August 2007 (UTC)
In order to avoid the British stamp duty that would otherwise be payable, the final transfer of eurodollar bonds traded in the City of London takes place in Luxembourg or Brussels. Joseph B. Fox 17:50, 1 September 2007 (UTC)
London has its own US dollar clearing system, but final inter-bank net settlement takes place across bank accounts in New York City. At the retail end of the market, dollar-denominated bank accounts are available in Britain which provide cheques (Am: checks) which clear equally well through both the London and American banking systems. Joseph B. Fox 17:52, 1 September 2007 (UTC)
It had long been assumed that the European single currency would be called the ECU (European Currency Unit). The ECU had been created as a banking currency in March, 1979. (Central banking facilities for the ECU were provided by the Bank for International Settlements, which is in Basel, Switzerland, and thus outside the European Union.) Travellers cheques (Am: checks) denominated in ECUs were available, and some purely commemorative ECU coins had been issued. The French in particular favoured the name, as there had been a French écu coin.
However, at the Madrid Conference of December, 1995, held to finalise details of the new currency, Germany’s Chancellor Kohl objected. He said that “ECU” sounded like “die Kuh”, the German for “the cow”. In what struck some observers as a demonstration of the true centre of power in the EU, Kohl’s suggested alternative name was accepted without objection.
That name was “euro”. This raised the possibility of confusion regarding eurodollars, eurobonds and other eurocurencies. But it immediately occurred to the writer that euros held outside the eurozone would be euro euros. This idea first appeared in the public prints above the writer’s name on the letters page of The Daily Telegraph (London) of August 23, 1996.
The term has since been used by Rodney Leach in “Monetary Union: a Perilous Gamble”, the Bank of England in “Practical Issues Arising from the Introduction of the Euro” and David Lascelles in “The Crash of 2003: an EMU Fairytale”. In the last mentioned, the author had the City of London’s traders dub the euro euro the “yo yo”, a diminutive of which this writer entirely approves.
It seems that the relevant EU authorities were alerted to the concept of the euro euro; perhaps mindful of camels and tents, the European Central Bank gave British banks access, through the Bank of England, to €3 billion-worth of intra-day liquidity (daylight overdrafts). They were also given direct access to TARGET, the pan-EU interbank euro clearing system. Thus the United Kingdom, while not using the euro, can be said to be part of the eurozone.
Since the introduction of the euro, the City of London has gained the lion’s share of the wholesale euro-denominated financial markets, somewhat to the chagrin of the authorities in Frankfurt and Paris. Joseph B. Fox 17:54, 1 September 2007 (UTC)
any currency held in a country where it is not the official currency?
- "There is nothing "European" about Eurodollar deposits; a US dollar-denominated deposit in Tokyo or Caracas would likewise be deemed Eurodollar deposits. Neither is there any connection with the euro currency. More generally, the "euro" prefix can be used to indicate any currency held in a country where it is not the official currency: for example, euroyen or even euroeuro."
- Um, this does seem a wee bit broad. I'd expect that US greenbacks invested in Niagara, Ontario Canada would not be referred to as "eurodollars", for instance. They'd simply be "US dollar accounts". Otherwise, too much chance to confuse them with other dissimilar national currencies also denominated in "dollar" amounts. Australia, Canada, Jamaica, Hong Kong, New Zealand and a few other places all have their own dollar currencies, none of which are based on the US version. They're also a long way from Europe. --220.127.116.11 (talk) 23:57, 25 February 2008 (UTC)
So if Joe Smith from NYC makes Citibank NYC transfer 1000 bucks for him to his London (or Hongkong) account at Citibank London (resp. Hongkong), those 1000 "home dollars" turn to "eurodollars"?
How, then, can the Fed calculate money growth (M2 etc.)?
I've encountered this term in fiction several times, and not once did it refer to the concept outlined in this article. It always referred to a fictional currency that the EEC issued to supercede the national currencies of EEC members. Obviously, that's dated, since the EEC was replaced by the EU, which then issued the Euro... but this article seems to shoot a European bias out. It definitely requires more non-European references, say from Japan, which the article states as an example of a place where eurodollar accounts exist. 18.104.22.168 (talk) 08:57, 27 June 2010 (UTC)