What is a Eurodollar?

A Eurodollar is a U.S. dollar–denominated deposit held in banks outside the United States, and thus outside the jurisdiction of the Federal Reserve.

They emerged in the 1950s when the Soviet Union wanted to hold dollars but feared the U.S. government might seize them. By keeping them in European banks, they avoided that risk.

Today, Eurodollars are an enormous part of the global financial system, with trillions of dollars circulating offshore. They play a key role in global liquidity and credit markets.