The creation and growth of the Eurocurrency market has been an important side effect of the increase of international economic activity over the past few decades. The market has expanded largely as a means of avoiding the regulatory costs involved in dollar-denominated financial. Due to the size and importance of the foreign exchange market, it remains largely unregulated. There is no international organization to look over it or any institutions that sets rules. The name Eurocurrency market is given to any bank deposits in any country held in a different country’s currency. An example of this is United States dollar depositing in a British bank. These banks are called Euro banks. The emergence of eurobanks has facilitated trade and investment between countries. A Eurocurrency is any currency that is deposited outside of the home country. Since approximately two thirds of Eurocurrency is U.S. dollars, central banks and regulators are concerned about Eurocurrency because they are stateless money. Eurocurrency market has very little regulation, such as taxes, restrictions on capital movements and exchange controls. Thus, the market attracts more investors. It is easier for banks around the world to use the Eurocurrency market to move and store funds more profitably than they could in many countries. Since the market is relatively free of regulation, Eurodollar market must operate on narrower margins than banks in the United States. The Eurocurrency market gives investors the opportunity to hold short-term claims on commercial banks, which also act as intermediaries to transform these deposits into long-term claims on final borrowers. Not only does Eurocurrency market allow for more convenient borrowing, it also improves the international flow of capital for trade between countries and companies. This market also attracts domestic deposits because it offers a higher interest rate. The largest Eurocurrency markets are located in London, New York, and Tokyo. .

Sources:

http://www.worldbank.org/

http://www.eagletraders.com/neg_financial_instruments/bankers_acceptance_o.htm