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Euro was launched on January 1, 1999 in line with schedule set out by the Maastricht treaty The Euro is issued and administered by an European system of central banks (ESCB) eleven out of fifteen member countries in the European economic and monetary union (EMU) linked their domestic currencies to Euro on December 31, 1998. Euro currency market is an international capital market which specialises in borrowing and lending of currencies outside the country of issue.
Euro was launched on January 1, 1999 in line with schedule set out by the Maastricht treaty The Euro is issued and administered by an European system of central banks (ESCB) eleven out of fifteen member countries in the European economic and monetary union (EMU) linked their domestic currencies to Euro on December 31, 1998. Euro currency market is an international capital market which specialises in borrowing and lending of currencies outside the country of issue.
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Euro was launched on January 1, 1999 in line with schedule set out by the Maastricht treaty The Euro is issued and administered by an European system of central banks (ESCB) eleven out of fifteen member countries in the European economic and monetary union (EMU) linked their domestic currencies to Euro on December 31, 1998. Euro currency market is an international capital market which specialises in borrowing and lending of currencies outside the country of issue.
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market Euro as a currency Euro was launched on January 1 , 1999 in line with schedule set out by the Maastricht treaty.
Eleven out of fifteen member countries in the
European economic and monetary union (EMU) linked their domestic currencies to Euro on December 31 , 1998 The Euro is issued and administered by an European system of central banks (ESCB)
ESCB comprises of European central bank and 11
national central banks which will set up the monetary policy and can alone authorize the issuance of Euro notes Till January 1 , 2002 Euro was transacted in the form of electronic currency later replaced by Euro notes and coins
From January 1 , 2002 the national currencies of 11
countries were replaced by Euro Euro currency market Euro currency market is also known as euro dollar market is an international capital market which specialises in borrowing and lending of currencies outside the country of issue. Thus deposits in dollars with a bank in London are Euro - dollars
Similarly French francs held by bank in London are
Euro – Francs
Pound sterling held by banks in Germany are Euro –
Sterling
All these are Euro - currencies
The main center of Euro currency are London and a few other places in Europe
The growth of market has now extended to Asian
centers like Singapore and Hongkong
The foundation of modern Euro currency was laid on
1949 Features of the market Transactions in each currency take place outside the country of its issue
Example: dollars earned by a Japanese firm from
exports may be deposited with a bank in London The London bank is free to use the funds for lending to any other bank. the bank may lend it to a French bank.
Thus utility of currency is entirely outside the control
of the central bank of the country issuing the currency.
that is why Euro currencies also referred as offshore
currencies Even though the currency is utlised outside the country of its origin, settlement will take place in its country of origin
When japanese firm deposited dollars with london
bank the london bank will keep its funds in a newyork bank in its own name When London bank lends the amount to French bank it will give instructions to New York bank which will debit London bank account and credit French bank account
Thus settlement of dollars take place in new York
Though Euro currencies are outside the direct control of central bank of their issue but they are subject to some form of indirect control
Euro – currency market is not a foreign exchange
market It is a market for deposits with and in between banks(interbank deposits) and loans by banks to non – bank public
It is a market in which foreign currencies are lent and
borrowed as distinct from foreign exchange market where they are bought and sold It is a pool of short term deposits that help commercial banks to transform into medium term and occasionally long term international loans
The transactions in the market involve huge amounts
running into millions of dollars The rate of interest is linked with the base rate of LIBOR The interest on deposits and advances changes in accordance with change in LIBOR US Dollar remains the leading currency traded in the Euro – currency market Euro currency market classification
Euro – credit market
Euro – bond market Euro – currency (deposits) market Euro – Notes market Euro credit market Most of the lending's takes the form of Euro credits
Euro – credits are medium term and long term loans
provided by international group of banks in currencies which need not be lenders or borrowers It belongs to whole sale sector of international capital market and involve large amounts8 Euro - Bonds A major source of borrowings at Euro – markets is through issue of international bonds called Euro – Bonds
Euro bonds are those sold for international borrowers
in several markets simultaneously by international group of banks They are issued on behalf of MNC’s, international agencies and governments In the past borrowers were largely from industrial countries Now developing countries have entered the market on a large scale Euro bond is different from foregn bond as a foreign bond is on behalf of a non resident borrower but sold in the domestic capital market of the issuing country by a group of banks
A Japanese firm may issue foreign bond exclusively in
west Germany Euro bond is outside the regulations of single country. Investors are spread world wide Types of euro bonds 1. Fixed rate bond 2. Convertible bond 3. Currency options 4. Floating rate note Euro currency deposit market
It represents the funds accepted by the banks themselves. deposits in currencies outside their home country
The minimum deposi in ECD market is USD 50000 or
its equivalent Euro - Notes These are the instruments of borrowings issued by corporations in the Euro currency market with or without underwriting support of the banks.
This is a process where borrower approaches lender