Legal Definitions - Eurodollar

Definition: Eurodollar refers to United States currency that is held in a bank outside of the United States, usually in Europe. This currency is commonly used to settle international transactions.

Example: A company based in Japan needs to pay a supplier in the United States for goods they received. Instead of using Japanese yen or U.S. dollars, they may choose to use Eurodollars held in a bank in Europe to complete the transaction.

Explanation: This example illustrates how Eurodollars can be used to settle international transactions. By using Eurodollars, the company in Japan can avoid currency exchange fees and potential fluctuations in exchange rates. The supplier in the United States can receive payment in U.S. dollars, which is their preferred currency, without having to worry about the complications of international currency exchange.