Definition
Eurodollar
Eurodollars are US dollar deposits held in banks outside the United States, forming a vast offshore dollar market central to global funding, despite the misleading name.
Despite 'euro' in the name, eurodollars are simply dollars parked in banks anywhere outside the US, London, Singapore, the Caribbean. This offshore pool funds much of global trade and finance beyond the reach of US domestic regulation.
The eurodollar system underpins international dollar lending that Indian firms tap through ECBs and trade finance. Stress in offshore dollar funding (rising borrowing costs) can tighten conditions for emerging-market borrowers, including Indian companies.
Related terms
- External Commercial Borrowing (ECB)External commercial borrowings are foreign-currency or rupee loans raised by eligible Indian companies from non-resident lenders under RBI's framework, subject to cost and end-use limits.
- Counterparty RiskCounterparty risk is the danger that the other party to a financial contract fails to meet its obligations, especially relevant in over-the-counter derivatives and forwards.
- PetrodollarPetrodollars are US dollars earned by oil-exporting nations from selling crude, historically recycled into global markets and reinforcing the dollar's status as the world's reserve currency.
- Reserve CurrencyA reserve currency is one that central banks hold in large quantities as foreign-exchange reserves and that dominates global trade and finance; the US dollar is the leading example.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.