EURO MARKET

A Euro market can be described as the financial market for eurocurrencies. Euro currency is
any currency held or traded outside its country of origin or issue. For example, dollar
deposited outside U.S.A is euro dollar.
The euro market is considered as a major financial source for international trade through
eurocurrency, euro credit and Eurobond.
EURO CURRENCY
Currency deposited in a bank outside the home market or country of issue by the government
or any corporation. Indian Rupees deposited in a bank in Australia is considered as euro
currency or US dollars deposited in a European bank is also Euro currency. It is important to
note that the term Eurocurrency applies to any currency and to banks in any country. Having
“euro” does not mean that the transaction has to involve European Currency.
EURO CREDIT
A loan provided by a bank in a currency that is not the banks national currency. For example,
a loan given by a US Bank in a currency other than US dollars to a borrower who requires a
currency which is different from US dollars for specific reason, or some business operations
or trade requirements. Usually the loan amount is too large and is provided to government,
corporations etc.
EUROBONDS
It is an international bond issued in a currency that is different from the currency of the
country or market in which it is issued. It is also called as External bond. For example, Bonds
issued in US dollars i.e. to raise funds in US dollars in India or Indian Market rather than
Indian Rupees.
Features of Euro markets
1. International markets-Euro market is an international market which accepts deposits
and gives credit in currencies from throughout the world.
2. Wholesale market-Euro market is a wholesale market. The size of transactions is
large. Transactions are rarely less than $1 million and sometimes they are for $100
million.
3. Short term market-it is a short-term market in which deposits in different currencies
are usually accepted and lent for a few days to a year and interest is paid or received
on them.
4. Unsecured credit-no doubt euro currency borrowers are big corporates who have
status and name I the market and thus credit risk is comparatively low. But since euro
currency loans are unsecured, special attention is required to judge credit worthiness
of borrower before providing any loan.
5. Commercial bank-it plays a major role in euro currency market as it involves
interbank operations as well.
6. Concentrated-euro currency market is focused upon London who is almost 1/3 rd. of
euro currency market. In other words, London is the focal centre for the market.