By Cherisse Sutton
Reporter SKNVibes.com
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EC Dollar Notes
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(Basseterre; St. Kitts): The Eastern Caribbean Central Bank is celebrating thirty-one years since the EC dollar has been pegged to the US dollar.
The EC dollar was issued for the very first time on October 6th 1965, back then it was pegged to the pound sterling at one pound to EC$4.80. The EC dollar was then pegged to the US dollar at a rate of EC$2.70 to US$1.00 since July 7th 1976 up until today.
However, following the sterling’s depreciation in the 1970’s and the emergence of the United States as the region’s major trading partner, the decision was made to shift the peg to the US dollar.
For curious minds currency pegging simply means that a country fixes the exchange rate of its currency to the currency of another country. Any decision to alter the peg of the EC currency rests with the Monetary Council, the highest decision making body of the Eastern Caribbean Central Bank (ECCB).
One of the main reasons for pegging the EC currency to the US currency is the fact that most of the external trade and financial (capital) flows are carried out with the United States.
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EC Coins
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When the region engages in US$ denominated transactions, whether trade or credit (loans), the peg eliminates uncertainty in the prices of goods and services and the value of debts due to fluctuations in the value of the currency. The US dollar acts as an anchor for the EC dollar.
The pegging of the EC currency to the US currency also means that when the value of the US dollar fluctuates relative to other currencies, the EC dollar undergoes a similar fluctuation in value relative to other currencies.
~~Adz:Left~~ It is also a means of giving people of the country stability and providing certainty as to the value of the EC dollar relative to the US dollar and allows foreigners and investors to have confidence in the currency of the region.
The EC dollar fixed exchange regime, with the EC currency pegged to the US dollar at a rate of EC$2.70 to US$1.00, has served the region well. The region has historically enjoyed a relatively low rate of inflation, incremental improvements in the standards of living for its people and economic stability.
