Euro Key Terms

Use Euro key terms to make sound investments and exchanges

By Mark Jenkins

The euro is one of the world's most important currencies. Although the dollar has been weaker than the euro for a number of years, changes in the economy have nudged toward a more favorable exchange rate. Whether you sell products overseas, have partners abroad or are considering investing in the euro by way of the foreign exchange market, knowing key terms will help you understand the European economy and make better-informed financial decisions.

Forex

An abbreviation for "foreign exchange," the term foreign also refers to the foreign exchange market. The forex market oversees the trade for trillions of dollars each year, and it's the place that determines the euro-to-dollar exchange rate.
Try: Learn more about the forex market and its relationship with the euro at Federal Reserve Bank of New York.

Euribor

Much like the federal funds rate in the United States, the Euribor, or Euro interbank offer rate, is the interest rate at which European banks loan each other money. The rate is an important indicator of European economic health and the strength of the Euro.
Try: Read the entry on the Euribor at Investopedia, then head to Euribor for more detailed information and historical data.

Eurozone

The Eurozone is the collection of countries within the European Union (EU) that uses the euro as its currency. Although some people think all of the EU member states use the euro, they don't; only 16 do. The Eurozone is also a type of economic and monetary union, or EMU.
Try: GoCurrency.com (PDF) has a primer on the euro and the Eurozone.

Maastricht criteria

In order for a European country to adopt the euro as its official currency, it must meet a strict set of criteria set forth by the Treaty on European Union. Established in 1992, these criteria, known as the Maastricht criteria, are responsible for ensuring that each member of the Eurozone is economically stable.
Try: You can find out more about the Maastricht criteria and the euro itself on the currency's homepage, hosted on the European Commission.

Anchor currency

Some countries around the world decided to peg their exchange rates to that of the euro, making it an anchor currency. The U.S. dollar is the world's most important anchor and reserve currency, but the euro is not far behind.
Try: Germany's Bundesbank, or federal bank, has published a short but informative article on the euro's growing role as an international anchor currency.

Reserve currency

A reserve currency is one in which foreign central banks hold their foreign exchange reserves. In simpler terms, it is essentially an international standard currency. As of 2009, the U.S. dollar is the world's most commonly held reserve currency, but the euro is right behind.
Try: Portfolio.com offers an article about the euro's rising prominence as a reserve currency.