The necessity to employ a greater variety of currencies increases as more firms expand internationally. The most extensively used and traded xenocurrency worldwide is the US Dollar. 

As the word xeno in modern English might have negative connotations, the term “xenocurrency” is not often used nowadays. For instance, “xenophobia” refers to an unjustified fear or hate of outsiders. Therefore, the phrase “foreign currency” has taken over as the standard way to refer to non-domestic currencies. 

What is xenocurrency? 

A currency that is traded outside of its country of origin is called a xenocurrency. Its name is derived from the Greek word “xeno,” which means “foreign.” As supply networks and financial markets become more globalised, these kinds of currency exchanges are becoming more frequent. 

However, xenocurrencies may also occasionally be referred to as Eurocurrencies. The primary Eurocurrencies in this scenario are: 

  • US dollar (US$) 
  • British pound (GBP) 
  • Euro (EUR) and the Japanese yen (JPY) 

Understanding xenocurrency 

Xenocurrency is also considered when currencies are traded or deposited into a bank account in another nation. The term originated in the 1970s to refer to investments, loans, and deposits made in currencies different from where the individual resided.  



How do xenocurrencies work 

Investments in xenocurrencies can be dangerous since several factors, such as exchange rate swings and conversion hazards, compound them. Deposits in an expanding domestic currency market present risks since the foreign investment may provide lesser returns when converted back into the domestic currency. For investments made in native currencies that are depreciating, the converse is true. These dangers are referred to as foreign exchange consequences. 

Additionally, political dangers may have a role. The government may restrict the quantity of xenocurrency that travellers are allowed to export from a country during a crisis. For instance, the Iranian rial fell to a record low versus the dollar in May 2018 when the United States withdrew from the Iran nuclear deal. 


Example of a xenocurrency 

 The US$ is frequently used in Mexico as a xenocurrency, particularly for significant real estate and other corporate transactions. Another illustration of utilising xenocurrency is if you’ve ever used US dollars to purchase products and services in Latin America.  


Challenges of using xenocurrency 

Working with xenocurrency involves risk and might provide several unanticipated difficulties. These are the top three issues: 

  • Fluctuation of transaction fees 

Several banks, cross-border money transfer companies, and international payment providers impose hefty fees to keep and transfer foreign currency. This might become a major price if your company deals with a lot of xenocurrency. Ramp doesn’t charge fees for international transactions, allowing you to streamline your usage of xenocurrencies as you expand. 

  • Pricing liquid assets 

Importing services or exporting goods to international markets both carry this risk. If liquid investments are valued in several currencies, companies may be exposed to risks related to asset price fluctuations. 

  • Fluctuation in exchange rates 

Due to their frequent fluctuations, foreign currencies can be challenging to manage and balance on your books. Demand might spike when many users visit their xenocurrency portfolios at once or execute a trade. Your currency balances might become extremely volatile as a result. 

Investments in xenocurrencies may carry a significant level of risk due to potential volatility in international exchange rates. Your foreign investment would provide lesser profits when converted if the value of your native currency increases. 

Of course, converting your overseas investment would yield a higher return if the value of your home currency declines. Foreign currency impacts are gains or losses brought on by currency changes. 


Frequently Asked Questions

Yes, cryptocurrencies are xenocurrencies in a way. This is due to the lack of a single central bank or governing body in the case of cryptocurrencies. Different nations have their regulations. According to Kaspersky, cryptocurrency is a peer-to-peer electronic payment method that doesn’t depend on banks to authenticate transactions. Instead, it uses digital ledgers, which are constantly updated files and record every transaction. 

You may manage your realisation costs and reduce conversion risks by using the appropriate spend management and payment software, which offers seamless foreign currency management. You can limit what workers can buy and what merchants can charge. 

Foreign currency is precisely what xenocurrency is. As a result of several active capital markets, there are numerous xenocurrencies throughout the world. The globalisation of finance has increased the trading of foreign currencies. For investors, businesses, and speculators alike, it’s a significant opportunity. But before you start, it’s just as important to ensure you comprehend the dangers and implement mitigation measures like hedges. 

The benefits of xenocurrency include: 

  • Globalised marketplace 
  • Technology expansion 
  • The market is open 24 hours a day 
  • No single organisation has full market control 
  • Transactional fees are less expensive 
  • Liquidity 

In Mexico, the U.S. Dollar (USD) is frequently used as a xenocurrency, particularly for significant real estate and other corporate transactions. 

Related Terms

    Read the Latest Market Journal

    Weekly Updates 27/5/24 – 31/5/24

    Published on May 27, 2024 18 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlocking Stock Market Potential with AI

    Published on May 24, 2024 65 

    Introduction of AI In the world we live in today, artificial intelligence (AI) is almost...

    Financial Sectors Thriving: Top Traded Counters in April 2024

    Published on May 21, 2024 87 

    At a glance: The Federal Reserve (Fed) held interest rates steady at 5.25% to 5.5%...

    One Dollar at a Time: The Potential of Fractional Shares

    Published on May 20, 2024 85 

    Table of contents 1. Introduction 2. Dollar-Cost Averaging 3. Popularity of Dollar-Cost Averaging 4. Small...

    Unit Trusts vs Exchange Traded Funds (ETFs) – Which is better for your portfolio?

    Published on May 20, 2024 87 

    Imagine you are dining at a nice restaurant, feeling overwhelmed by the variety of seemingly...

    Weekly Updates 20/5/24 – 24/5/24

    Published on May 20, 2024 22 

    This weekly update is designed to help you stay informed and relate economic and company...

    What is CFD? With 2 Practical Examples

    Published on May 15, 2024 108 

    In this article, you will learn what CFD (Contract for Difference) is, the costs and...

    What is ESG investing, and why is it important?

    Published on May 15, 2024 116 

    Over the last five years, Environmental, Social, and Governance (ESG) investing has evolved from being...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com