Definition
The Eastern Caribbean Dollar (XCD) is the official currency of eight countries in the Eastern Caribbean. It is issued and managed by the Eastern Caribbean Central Bank (ECCB). These countries include Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Anguilla, and Montserrat.
Phonetic
The phonetic pronunciation of the keyword “XCD” (Eastern Caribbean Dollar) is:/ˈɛks si di/
Key Takeaways
- The Eastern Caribbean Dollar (XCD) is the official currency of eight countries that form the Eastern Caribbean Currency Union, which is a part of the Organisation of Eastern Caribbean States. These countries include Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines.
- The XCD was introduced in 1965 as a replacement for the British West Indies Dollar, and its value is pegged to the United States Dollar (USD) at a fixed exchange rate. Currently, the exchange rate is 1 USD to 2.70 XCD.
- The Eastern Caribbean Central Bank (ECCB) is responsible for issuing and regulating the XCD, as well as managing monetary policy and maintaining financial stability within the Eastern Caribbean Currency Union.
Importance
The XCD (Eastern Caribbean Dollar) is an important business/finance term as it represents the official currency of eight countries in the Eastern Caribbean Currency Union (ECCU), namely Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Anguilla, and Montserrat. As a shared and stable currency across these territories, it encourages economic integration, facilitating smoother trade and financial transactions within the region. Additionally, the XCD is pegged to the US Dollar, offering assurance of its value while reducing exchange rate risks for trade and investment with the United States, a key trading partner for many Eastern Caribbean countries. Consequently, a solid understanding of the XCD is crucial for businesses and financial institutions operating within or engaging with the ECCU.
Explanation
The Eastern Caribbean Dollar (XCD) serves as the common currency used among the eight island nations belonging to the Eastern Caribbean Currency Union (ECCU). Established to promote economic stability and integration, the XCD simplifies trade operations and fosters investment opportunities among its member countries. Consequently, the XCD plays an essential role in organizing economic transactions within the region, diminishing conversion fees, and mitigating transaction costs associated with international trade. By eliminating the need for multiple, individual currencies, the ECCU streamlines trade among its members. In terms of the global economy, the value of the Eastern Caribbean Dollar (XCD) is firmly pegged to the United States Dollar (USD), maintaining a fixed exchange rate since 1976. This arrangement promotes financial stability and aids in shielding member countries from inflationary pressures and external shocks arising from fluctuations in foreign exchange markets. Furthermore, using the XCD as a shared currency allows for the implementation of common monetary policies, which are administered by the Eastern Caribbean Central Bank. This central bank guides and regulates the region’s financial framework, oversees the operations of commercial banks, and manages foreign exchange reserves. Ultimately, the XCD’s purpose is to bolster the financial well-being and economic growth of its affiliated territories while encouraging cooperation and interconnectedness in the Caribbean region.
Examples
1. Currency Exchange: A tourist from the United States visits the island of Saint Lucia, an Eastern Caribbean nation that utilizes the XCD as its official currency. In order to make purchases and pay for services during their stay, the tourist must exchange their US Dollars (USD) into Eastern Caribbean Dollars (XCD) at a local bank or currency exchange office. 2. Import and Export Trade: A business based in Antigua and Barbuda, which also uses the XCD as its currency, imports goods from the United States. The business must convert its Eastern Caribbean Dollars into US Dollars for the international transaction to purchase products from the American supplier. Furthermore, when exporting goods to the United States, the same business must consider the currency exchange rate to accurately price the goods for sale in USD. 3. Foreign Investments: An investor from Dominica, another Eastern Caribbean nation that uses the XCD, decides to invest in a real estate project in Grenada. To fund the investment, the investor must convert their Eastern Caribbean Dollars into the currency being used for the project, taking into account fluctuations in the exchange rate to appropriately calculate the investment amount and potential return.
Frequently Asked Questions(FAQ)
What does XCD stand for?
Which countries use the Eastern Caribbean Dollar?
What is the abbreviation for the Eastern Caribbean Dollar?
Who issues the Eastern Caribbean Dollar?
What is the exchange rate of the Eastern Caribbean Dollar?
How is the Eastern Caribbean Dollar divided?
Are US Dollars accepted in the Eastern Caribbean region?
Can I get Eastern Caribbean Dollars before traveling?
Related Finance Terms
- Caribbean Currency Authority (CCA)
- Eastern Caribbean Central Bank (ECCB)
- Organisation of Eastern Caribbean States (OECS)
- Foreign Exchange Reserves
- Fixed Exchange Rate System
Sources for More Information
