I often have people asking me about “Eurodollars” in reference to currency trading. It is actually a common mistake people make, but the “Eurodollar” contract is not a currency. It is an interest rate contract.
The “Euro currency” or simply “Euro” is the currency. It’s the rate of US Dollars for one Euro.
The “Eurodollar” contract is totally different. It is an interest rate product based on a 90 day bank deposit. It has become the benchmark for US Dollar based, low risk (but not government guaranteed) bank desposits.
The CME launched Eurodollar contracts in 1981 and they have since become the most actively traded futures contract on the globe.
Contracts are listed on the March quarterly cycle (Mar, Jun, Sep and Dec) extending out 10 years. Serial contracts are also offered on the nearest four calendar months (those not part of the March quarterly cycle).
Given deep liquidity across expiries for at least several years out, the contract is popular among spread traders and provides some terrific trading opportunities.
So you ask – why are they called Eurodollars? The term has been around since the Cold War. Back then, some European investors wanted to hold money in US Dollars but didn’t want to send it to the US for fear of not being able to get it back. So European banks started offering US Dollar denominated deposits or ‘Eurodollars’.
The following eSignal quote page shows Eurodollar contracts out to 2017. You can see liquidity as measured by Open Interest to be strong for several years out.