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Essay / Research Paper Abstract
This 3 page paper outlines what is meant by a Eurocurrency, looks at why there may be a difference between Eurocurrency interest rates and their national ‘equivalents’. The paper also considers the relationship between different Eurocurrency interest rates and the relevant spot and forward market exchange rates. The bibliography cites 5 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEeurcny.rtf
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Unformatted sample text from the term paper:
a Swiss bank they are Eurodollars. Central to understanding why interest rates may vary between Eurocurrencies and their equivalent domestic money market rates is the need to understand what they
are and how they are used (Howells and Bain, 1998). This is a market that started in the 1960s as a method of circumnavigating US banking regulations, today it
is a market that the demand that results from international trade for short term supply and demand of foreign currency loans. The main borrowers as well as lenders in this
markets are the commercial banks, central banks and also large companies (Howells and Bain, 1998). By being able to raise money in this way or to lend money
in this way it is possible to gain better terms attached to the transaction as well have the possibility of being able to aid some costly internal regulations, there is
also the ability to avid some taxes (Howells and Bain, 1998). There are several reasons for a potential differential between the Eurocurrency and domestic interest rate as indicated
by those in the market. The reason may be seen in the aspect of the Eurocurrency market as a wholesale market, the factor that it is made up of large
high quality clients and also the fact that there is no deposit insurance. These are all elements that reflect in the cost of lending, as thy are potentially different in
this market thy have the ability to impact on the interest rates charged or paid. In effect there is both the issue of supply and demand of the currency, but
also the external impacts that are usually reflected in the cost of internal borrowing (Nellis and Parker, 2000). The trading of Eurocurrencies is usually for short term loans, but
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