Denominated

Denominated definition

As its name suggests, denominated securities and currencies are expressed in terms of a specific unit of currency. U.S. dollar-denominated financial instruments are issued with face values that refer to a specific amount in dollars; Chinese yuan-denominated bonds are considered in terms of yuan. Some members of the European Economic Union offer Euro-denominated securities as well; any country or organization that issues circulating currency can potentially issue financial instruments that are denominated in that currency.

Currency denomination

Currency denomination is perhaps the easiest type to recognize, since it typically is indicated on the currency itself. For instance, dollar-denominated currency has its value expressed in dollars written on the face. Currency can be converted from one denomination to another or traded in its original denomination, depending on the desired result. Denominated currency can be held in a country other than the one in which it was issued. When U.S. dollars are held in foreign banks, for example, they are called Eurodollars. This is true whether the dollar-denominated currency is deposited in a European bank or anywhere else in the world. The term Eurodollars was coined during a time when most such deposit arrangements were conducted with European banking houses, but its usage has expanded over time to include other countries as well.

Denominated bonds

Like currencies, bonds and other financial securities can be denominated as well. A denominated bond can be traded internationally, but is expressed in terms of its denominating currency. For instance, the Chinese Ministry of Finance recently announced that it would issue yuan-denominated bonds in Hong Kong in an effort to establish a foothold for the yuan in the larger international economic market and to show FOREX investors that the yuan is a viable and reliable medium for trade and investment.