Eurodollars

Eurodollars are U.S. dollar-denominated deposits held in banks outside the United States, typically in Europe. These deposits are not subject to U.S. banking regulations, allowing banks to offer higher interest rates and more flexible terms. Eurodollars are commonly used in international finance for lending, borrowing, and hedging purposes, as they provide a liquid and efficient means of accessing dollar funding outside the U.S. The Eurodollar market is a significant component of the global financial system, influencing interest rates, foreign exchange markets, and international trade.

Example

A European corporation might use Eurodollars to finance its international operations, taking advantage of the attractive interest rates offered outside the U.S.