Eurodollar.
In plain English
Eurodollars are dollar-denominated deposits held at banks outside the United States, including foreign branches of American banks. They exist because borrowers and lenders around the world want dollars without routing through the domestic US banking system. The market is wholesale rather than retail: large short-term deposits placed between banks and corporations, and historically the base for widely used short-term dollar interest rate benchmarks. Because these deposits sit offshore, they fall outside US deposit insurance and domestic reserve rules, which is part of why the market grew so large.
01Why it matters
Much of global trade finance is funded in this offshore dollar market, so stress there can raise borrowing costs worldwide even when the domestic US banking system looks perfectly calm.
02The math, step by step
Say a Singapore bank takes a 50 million dollar three-month deposit at 4 percent and lends it to a trading company at 5 percent. The bank earns the 1 point spread, about 125,000 dollars for the quarter, and no US branch touches either side of the deal.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
Eurodollars are not euros. They are dollars, held offshore. The prefix means outside the home jurisdiction, so a dollar deposit sitting in Tokyo counts as a eurodollar just as much as one in Frankfurt.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice