Eurocurrency

Eurocurrency is currency held on deposit outside its home market, i.e., held in banks located outside of the country which issues the currency.^[1] For example, a deposit of US dollars held in a bank in London, would be considered eurocurrency, as the US dollar is deposited outside of its home market.

The Euro- prefix does not refer exclusively to the "euro" currency or the "eurozone", as the term predates the creation of the euro. Instead, it can be applied to any combination of deposits in a foreign bank outside of its home market e.g. a deposit denominated in Japanese yen held in a Swiss bank is a Euroyen deposit.

Eurocurrency is used for short-to-medium term financing by banks, multinational corporations, mutual funds, and hedge funds. Eurocurrency is generally seen as an attractive source of global funding due to its ease of convertibility between currencies as well as typically lower regulatory measures compared to sources of funding in domestic markets. Eurocurrency and eurobond markets avoid domestic interest rate regulations, reserve requirements and other barriers to the free flow of capital.^{[citation needed]}

The relevance of eurocurrency deposits has been disputed ever since its inception in the 1950s by notable economists including Ronald McKinnon,^[2] yet it remains a prevalent aspect of the global financial system.