Foreign Currency Bonds

Definition of "Foreign Currency Bonds"

A proposed zero-rate financial instrument for raising funds by government. The foreign currency bonds are issued by a government against foreign currency loans. They may be used when the value of the local currency is likely to decline in terms of foreign currency. The incentive offered is the guarantee of payment in the foreign currency in which the bonds are issued. As they are issued when the foreign currency is more stable than the domestic currency, these bonds are a protection against domestic currency devaluation or inflation. The individuals who do not have any investment opportunities may be interested in placing their surplus funds in these bonds.