A Eurocurrency market is a money market that provides banking services to a variety of

customers by using foreign currencies located outside of the domestic marketplace. The concept
does not have anything to do with the European Union or the banks associated with the member
countries, although the origins of the concept are heavily derived from the region. Instead, it
represents any deposit of foreign currencies into a domestic bank. For example, if Japanese yen
is deposited into a bank in the United States, it is considered to be operating under the auspices
of the Eurocurrency market.
This market has its roots in the World War II era. While the war was going on, political
challenges caused by the takeover of the continent by the Axis Powers meant that there was a
limited marketplace for trading in foreign currency. With no friendly government operations
within the European marketplace, the traditional economies of the nations were displaced, along
with the currencies. To combat this, especially due to the fact that many American companies
were tied to the well-being of business behind enemy lines, banks across the world began to
deposit large sums of foreign currency, creating a new money market.
One of the factors that make the Eurocurrency market unique compared to many other money
market accounts is the fact that it is largely unregulated by government entities. Since the banks
deal with a variety of currencies issued by foreign entities, it is difficult for domestic
governments to intervene, particularly in the United States. With the establishment of the flexible
exchange rate system in 1973, however, the U.S. Federal Reserve System was given powers to
stabilize lending currencies in the event of a crisis situation. One problem that arises is that these
crises are not defined by the regulations, meaning that intervention must be established based on
each case and the Federal Reserve must work directly with central banks around the world to
resolve the matter. This adds to the volatility of the market.
Despite its name, the Eurocurrency market is primarily influenced by the value of the American
dollar, since nearly two-thirds of all assets around the globe are represented by U.S. currency.
The challenge with foreign banks revolves around the fact that regulations enforced by the
Federal Reserve are really only enforceable within the U.S. The taxation level and exchange rate
of the American dollar varies depending on the nation; for example, an American dollar in
Vietnam is worth more than it is in Canada, further influencing the market.

FDI VS FII
- Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct
Investment is an investment that a parent company makes in a foreign country. On the contrary,
FII or Foreign Institutional Investor is an investment made by an investor in the markets of a
foreign nation.

In FII, the companies only need to get registered in the stock exchange to make investments. But
FDI is quite different from it as they invest in a foreign nation.
The Foreign Institutional Investor is also known as hot money as the investors have the liberty to
sell it and take it back. But in Foreign Direct Investment, this is not possible. In simple words,
FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and
exit that easily. This difference is what makes nations to choose FDIs more than then FIIs.
FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign
investment for the whole economy.
Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises
capacity or productivity or change its management control. In an FDI, the capital inflow is
translated into additional production. The FII investment flows only into the secondary market. It
helps in increasing capital availability in general rather than enhancing the capital of a specific
enterprise.
The Foreign Direct Investment is considered to be more stable than Foreign Institutional
Investor. FDI not only brings in capital but also helps in good governance practises and better
management skills and even technology transfer. Though the Foreign Institutional Investor helps
in promoting good governance and improving accounting, it does not come out with any other
benefits of the FDI.
While the FDI flows into the primary market, the FII flows into secondary market. While FIIs
are short-term investments, the FDIs are long term.
-A lot has been written on FDI (Foreign Direct Investment) and FII (Foreign Institutional
Investor) already, and I found a great succinct explanation from Business Line explaining the
difference between FDI and FII investments as one flowing into the stock market (FII) and the
other flowing into the primary market (FDI), and all other differences emerging out of that one
key point.
FDI (Foreign Direct Investment) is when a foreign company invests in India directly by setting
up a wholly owned subsidiary or getting into a joint venture, and conducting their business in
India.
IBM India is a wholly owned subsidiary of IBM, and is a good example of FDI where a foreign
company has set up a subsidiary in India and is conducting its business through that company.
Whats amazing about IBM is that, it is now the largest Indian IT company in India. It is serving
Indian customers, and a large domestic market that was not tapped by the Indian players
themselves.

Foreign companies partnering with Indian companies to set up joint ventures is more typical and
Starbucks partnering with Tata Global Beverages Limited is a recent example of FDI through
joint venture, but there are several others in the insurance, telecom, food industry etc.
FII is when foreign investors invest in the shares of a company that is listed in India, or in bonds
offered by an Indian company. So, if a foreign investor buys shares in Infosys then that qualifies
as FII Investment.
It is easy to see why you would prefer FDI to FII investments. FDI investments are more stable
because companies like IBM set up offices, hire employees, and have a long term plan for the
country. IBM cant just pull out a few million dollars from India overnight, which is what FII
investors do from time to time and that leads to market crashes.
In India, attracting FII has been easier than FDI because of the policy uncertainty and procedural
delays. An RBI study has the following para on FDI slowdown and it is easy to see how it is tied
to the politics in the country.