Eurocurrency Markets

Abstract

The problem of Eurocurrencies has been mentioned in the previous chapter in connection with the fact that the external monetary position of a country is seriously influenced by the quantities of foreign exchange originating from and going to the Euromarkets. The flow and accumulation of Eurocurrencies has become a significant factor in the international monetary system since it has an effect on the balance of payments—and thus on the external monetary position—of both the issuer and the user as well as the intermediary states. The existence of Eurocurrencies has a great influence on the reserves of the issuing central bank, too, because they come into being through the amounts of national currency which went abroad and were not exchanged, thus not reducing the reserves of the issuing central bank. There need not necessarily be any interconnection between the reserves of the central banks of the user and the intermediary countries, since the flows of Eurocurrencies do not automatically affect them. They do so only in the case when a Eurocurrency is converted into a national currency or vice versa.