EURO DEPOSIT

The equivalent of a money market rate on cash deposits made in the euro currency. Euro deposit rates will usually be quoted as "money market euro deposit rates" and are typically only offered to U.S. investors with minimum investments of greater than 10,000 euros. Euro deposits pay a floating interest rate (like a money market account) and offer the chance for capital appreciation if the euro appreciates against the investor's home currency (presumably the dollar). Euro deposit rates are based on the euro interbank offer rate, which is set by the European Central Bank.

There has been increased investor demand for cash equivalents in currencies outside of the U.S. dollar. If the dollar decreases in value compared to other currencies, there is little recourse for the investor's loss of global purchasing power, but by holding a euro-denominated asset, the investor can diversify some of his currency risk and possibly reduce overall portfolio risk in the process.