Final answer:
The currency most used to denominate Eurobonds is the U.S. dollar, which dominates the foreign exchange market and is the preferred choice for issuers and investors due to its stability and liquidity.
Step-by-step explanation:
The currency most used to denominate Eurobonds is the U.S. dollar. Eurobonds can be denominated in various currencies, but the prevalence of the U.S. dollar in global finance makes it the most popular choice for issuers and investors alike. The dominance of the U.S. dollar in the foreign exchange market is evident as it is involved in 88.3% of all foreign exchange transactions, surpassing other major currencies such as the euro, the British pound, the Australian dollar, and the Japanese yen.
The U.S. dollar is followed by the euro in terms of trading volume on foreign exchange markets. Although the euro has been adopted by many EU members as a common currency, replacing former national currencies like the German Mark and the French Franc, it still ranks below the U.S. dollar in terms of foreign exchange market share and Eurobond denomination. The British pound remains a significant currency due to the UK's economic stature, although it is not as commonly used for Eurobonds as the U.S. dollar.
In the context of Eurobonds, the choice of currency can be influenced by several factors including the issuer's currency preferences, potential savings on interest costs, currency risks, and the target investor base. While other currencies are used, the U.S. dollar's role as a global reserve currency and its widespread acceptance provide the essential liquidity and stability that issuers and investors seek in the international bond market.