EECS 1541 Lecture Notes - Lecture 6: United States Dollar, Money Market
22 Jun 2018
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EECS 1541 Lecture 6 Notes
Introduction
Asian Money Market
Like the European money market, the Asian money market originated as a market
involving mostly dollar-denominated deposits
In fact, it was originally known as the Asian dollar market.
This market emerged to accommodate the needs of businesses that were using the U.S.
dollar (and some other foreign currencies) as a medium of exchange for international
trade.
These businesses could not rely on banks in Europe because of the distance and
different time zones.
Today, the Asian money market is centered in Hong Kong and Singapore, where large
banks accept deposits and make loans in various foreign currencies.
The major sources of deposits in this market are MNCs with excess cash and
government agencies.
Manufacturers are major borrowers in this market.
Banks within the Asian money market usually lend to each other when some banks have
excess funds and other banks need more funds.
The Asian money market is integrated with the European money market in that banks in
Asia lend to and borrow from banks in Europe.
Money Market Interest Rates among Currencies
The money market interest rates in any particular country depend on the demand for
short-term funds by borrowers relative to the supply of short-term funds provided by
savers.
In general, a country that experiences both a high demand for and a small supply of
short-term funds will have relatively high money market interest rates.
Document Summary
Like the european money market, the asian money market originated as a market involving mostly dollar-denominated deposits. In fact, it was originally known as the asian dollar market. Asia lend to and borrow from banks in europe. The money market interest rates in any particular country depend on the demand for short-term funds by borrowers relative to the supply of short-term funds provided by savers. Conversely, a country with both a low demand and a large supply of short-term funds will have relatively low money market interest rates. It was originally known as the asian dollar market. This market emerged to accommodate the needs of businesses that were using the u. s. dollar (and some other foreign currencies) as a medium of exchange for international trade. These businesses could not rely on banks in europe because of the distance and different time zones.
