Identify an external currency market and how it operates? What will b

Identify an external currency market and how it operates?

What will be an ideal response?

ANSWER

Answer: An external currency market is an interbank market for deposits and loans that are denominated in currencies that are not the currency of the country in which the bank is operating. Its settlement procedures are identical to those of the foreign exchange market. The first currency for which these deposits and loans began to trade was the dollar, and the deposits were called eurodollars because they were dollar-denominated deposits at European banks.