chapter  13
THE EUROCURRENCY MARKET
Pages 6

There are two sorts of banking transaction, those carried out in the native currency and Euro ones. The dollar is the native currency in the USA, the pound in the UK and so on and traditionally nearly all banking transactions were executed in the respective native currency of the bank accepting a deposit. In recent years, however, more and more banking transactions have been Euro ones, that is involving banks in accepting deposits or making loans in a currency which is not native to them. A typical Eurocurrency transaction would involve an Arab depositing dollars with a London bank or an Italian borrowing Deutschmarks from a French bank. The precise defi nition of the Eurocurrency market has been a matter of some debate (see Gowland (1979), pp. 65-6) but the underlying concept is of an active banking market outside the country which issues the currency concerned. The Eurodollar market is the largest of the Euromarkets but there are Euromarkets in virtually all the European currencies. Many of the Eurobanks and dealing centres are located in Asia and currency never changes hands, so the name is potentially misleading.