What is euro money market?

What is euro money market?

Plse give me detail info regarding this as i have a project on it.


In broad terms the Euro money market is the financial markets of Europe, especially London. That would include banking, stocks (equities), bonds, and foreign exchange trading.Despite the name, it is not connected to the Euro, the currency used by most members of the European Community. Much of the Euro money market activity is denominated in, and uses, dollars.In fact, the "Euro money" market really began as the "Euro Dollar" market in the 1960's when US financial firms were accepting US dollar deposits from customers not in the US (Saudi Arabia, Japan, Germany) because the dollar was then the overwhelming medium for international transactions. If a Swedish firm wanted to buy bananas from a Honduran supplier, the supplier didn't want Swedish kroner, it wanted dollars. And it would take payment in London because that would be harder for the Honduran government to control (or tax, or take). Same for a Japanese auto firm shipping cars to Thailand. The Thai buyer might have yen but quite possibly it would prefer to pay dollars and the Japanese seller was happy with that -- especially if the deal were all transacted in London. For much of the 1960's the US government worried itself sick about "all those dollars coming back to the US," fearing it would be potentially inflationary. Eventually they realized the dollars wouldn't "come home" because the world needed them for trade and investment.A prime example of the US dollar's role in the Euro money market is LIBOR. LIBOR stands for London Inter-Bank Offer Rate: it is the interest rate on US dollars offered by one bank operating in London for dollars deposited with it for a short period (one month, three months, etc.) Those banks may be European (UK, Germany, etc.) but they may well be US banks like JP Morgan Chase, Wells Fargo or even an Asian bank like Thailand's Bangkok Bank. LIBOR is set in the London market, is for US dollars, and is often used as a benchmark for other loans. For example, a loan from a consortium of major banks and insurance companies to a government borrower in a developing country, such as the Electrical Generation Authority of Thailand might be priced as "LIBOR plus 50" (meaning it is priced at the current LIBOR plus 50 basis points -- or half a percent. So, if LIBOR was 1.2% the rate of the loan would be 1.7%The Euro money market also includes direct foreign exchange transactions, such as the London treasury office of a Japanese company (Honda) selling $34.6 million to a Brazilian bank that wound up with more German marks than it wanted.In time the London financial market expanded and developed (or, depending on your perspective, perhaps metastasized) to cover a wide range of currencies, IPO's, takeovers of British firms by Malaysian ones, swaps, derivatives, mortgage insurance, and just about anything that involved money, ownership, and debt. Then Paris and Frankfort began to get into the act. But most of the action is still in London. The ultimate borrower might be a bus driver buying a house in Los Angeles and the ultimate lender might be a dentist in the Czech Republic. But if part of the deal (the NY firm packaging dodgy home loans to sell to a Luxumbourg money manager taking funds from that dentist) is done in Europe and involves more than one country in the pipeline ts is in the Euro Money Market.Source(s):Formerly an international economist with US Treasury and JP Morgan Chase.



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