Eurodollar

Eurodollars is a financial term used to describe certain U.S. dollar-denominated deposit liabilities (primarily but not exclusively time deposits) held at banks or their branches outside the United States. The name existed before the creation of the euro currency of the European Union and has no connection with it. The term originated with U.S. dollar deposits held in European banks. The term has expanded to include U.S. dollar-denominated deposits held at banks anywhere outside the United States. A deposit in a financial centre such as Dubai or Singapore, for example, is likewise considered a Eurodollar, though deposits held in certain Asian financial centres are also sometimes called Asiadollars. More generally, the euro- prefix can be used to indicate any currency held in a country where it is not the official currency, broadly termed "eurocurrency", for example, Euroyen or even Euroeuro. They are financially important because they are outside the control of the US government. Eurodollars have different regulatory requirements than dollars held in U.S. banks. Eurodollars can be riskier than assets held in U.S. banks, which include at least partial deposit insurance, and as a result, demand a higher interest rate. Eurodollar loans facilitate global trade and investment and liquidity. The eurodollar futures market was a major interest rate market until the Libor scandal. By 2023, most volume had moved to SOFR futures.