Sumit Final Euro Final

8/3/2019 Sumit Final Euro Final

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Euro Currency Market features

and its Instruments

Presentation By-Rajesh maitySumit dasManigandan madhuliar


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WHAT IS EURO CURRENCY?

Euro Currency-

Any currency banked outside its country of origin.

Currency deposited by national governments or corporations in banks outside their home

market. This applies to any currency and to banks in any country.

The euro is the second largestreserve currency as well as the second most traded

currency in the world after the United States dollar.

Example -

US dollar banked in England is know as euro currency.

Euro bank-

Banks that accepts deposits and make loans in foreign countries

Example -

Euro Currency Bank at Frankfurt franc.
http://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Reserve_currency


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ContEURO BANK

HOW IT WORKS:

If an American company wants to buy parts from a European company, itcan use a euro bank to obtain the proper currency.

Rather than holding foreign currency in its own account, an Americancompany can simply pay a euro bank in dollars, and the euro bank willcomplete the transaction in Euros.

Why It Matters:

Euro bank facilitates :-

Global trade .

Flows of capital between countries .

Promoting international economic growth and development. Providing international financial services.

Euro banks creates rate competition among banks and meets the demandof international investors wanting to hold foreign currencies.


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EURO CURRENCY MARKETS

Its is market forborrowing andlending of currency at the centeroutside

the country in which the currency is issued.

It is a different than theforeign exchange market, where the currency is

brought andsold .

The international currency markets, also known as offshore markets

where currencies are borrowed and lent.

Euro-currency market, also know as euro dollar market.

Euro currency market allows for convenient borrowing, which improvesthe international flow of capital for trade between countries and

companies.


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EURO CURRENCY MARKETSThis is a Capital Market:

Dollar deposited in London is called as Euro-Dollar deposit .

Sterling deposit in Germany is called as Euro-Sterling deposit .

Euro loan extended in Japan is called as Euro-Euro loan .

Centers for Euro-Currencies:

London

Few other in Europe

Singapore (also called as Asian Dollar Market)

Hongkong


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EURO CURRENCY MARKETS

The European Currency Market is an external banking system that runs

parallel to the domestic banking system of the country that issued the

currency.

The Eurocurrency market operates at the interbank/ and or wholesale

level.


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EURO CURRENCY CENTERS

Currencies Country

Austrian Schilling Austria

Belgian Franc Belgium

Dutch Guilder Netherlands

Finnish Markka Finland

French Franc France

German Mark Germany

Irish Punt Ireland

Italian Lira Italy Luxembourg Franc Luxembourg

Portuguese Escudo Portugal

Spanish Peseta Spain


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SPECIAL FEATURE OFEURO CURRENCY MAYKET

SPECIAL FEATURE OF EUROCURRENCY MAYKET


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Currency are also known as offshore

CurrenciesTransaction in each currency take place out

side the country of its issue.

It has to be held only in the Countries of its issue

Even though the currency is utilised

outside the country of its origin ,its has

to be held only in the country of of its

issue


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They are subject to some of indirect

control

Though euro currency are out side the direct

control of the monetary authority of there

respective country issue.

It is a market for deposits with and

Between banks

Euro currency market is not a foreign exchange

market.


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Large scale financing

The transaction in the market involve

huge amounts running into millions of

dollar

Euro currency market is highly competitivemarketIt is also free access for new

intuition in the market


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The concept of floating rate of interest

The rate of interest is linked to abase rate,

usually the London inter bank offer rate

LIBOR

The leading currencies traded in

the European market

US Dollars remains the leading

currency trade in the European Market,

even though the share is declining


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The euro currencies market can broadly be divided into four segment

Euro-credit marketWhere international group of Banks

engage in lending for medium & long term

Euro bond market

Where the Banks raised funds on behalf

of international borrowers by issuing bonds


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Euro currencies [deposit] market

Where the bank accept deposit

mostly for short term.

Euro-notes market

Where the corporate raised funds.


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INSTRUMEENTS OF EURO CURRRENCY

MARKETEuro credits

Most of the lending in Euro- currency markets takes the form of Euro

credit. Euro credit are Medium and long term loans provided by

international group of banks in currencies which need not be those of the

lenders or borrowers, Euro credit belongs to wholesales sector of the

international capital market and normally involves large amounts.

Period :

Normally it extends up to 15 Years but most of the credits are for period of

5 to 8 years. On an average about 5% of the total credits are for periods

ranging from 1 to 5 Years and about 10% from 10 to 15 Years..


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Syndication of Loans

Each euro-credit runs into a huge amount of a few hundred million

dollars. It is not safe or possible for a single bank to undertake the

entire amount. Thus few banks form a syndicate to provide funds to

the borrower.

Euro bonds

A major source of borrowing at Euro-markets is the through

the issue of international bonds know as Euro bonds . This

bonds are sold for international borrowers in several market

simultaneously by the international group of banks.


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Euro-notes

Euronotes constitute the instruments of borrowing issued by corporate in the

Euro currency market. With or without the underwriting support of banks

Euro notes instrument are commercial paper, Note Issuance Facilities and

Medium Term Notes.

Commercial paper

Commercial paper is a promissory note of maturity less than a year

issued by a corporate body.

Commercial paper are issued from 90 to 180 days they are unsecured

instrument

For Example : they are issued in Denominations like USD 100,000.

which are issued at discount.


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Types of bonds

Samurai Bond : A yen-denominated bond issued in Tokyo by a

non-Japanese company and subject to Japanese regulations

Other types of yen-denominated bonds are Euroyens issued in

countries other than Japan


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Types of bonds

Bulldog Bond : A sterling denominated bond that is issued in

London by a company that is not British,

E.g.: These sterling bonds are referred to as bulldog bonds as the

bulldog is a national symbol of England.

Yankee Bond : A bond denominated in U.S. dollars that is

publicly issued in the U.S. by foreign banks and corporations Yankee bonds are often issued in tranches and each offering can

be as large as $1 billion


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American Depositary Receipt.

ADR is short for American Depositary Receipt.

An ADR is an indiret way for foreign stocks to trade on American

exchanges.

ADRs trade just like ordinary American stocks, and the exchanges

provide us with the same data as for normal stocks.


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Global Depositary ReceiptA negotiable certificate held in the bank of one country representing a specific

number of shares of a stock traded on an exchange of another country.

A financial instrument used by private markets to raise capital denominated in

either U.S. dollars or Euros.


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