What differentiates a Eurodollar deposit from a regular deposit?

A Eurodollar deposit is defined as a deposit held in U.S. dollars at a bank outside of the United States. This distinction is significant because it allows the deposit to be utilized in international transactions and does not require adherence to U.S. banking regulations.

The fact that Eurodollar deposits are denominated in U.S. dollars emphasizes their role in global finance, where they provide a means for investors to hold U.S. dollar assets without placing their funds in American banks. This characteristic sets them apart from regular deposits, which can be in various currencies and are typically subject to local banking regulations.

The understanding of this concept is crucial in the context of international finance, as Eurodollar deposits are a major source of liquidity and can significantly influence global interest rates and currency valuation.