Devaluation pushed by NIR build out

Net inflows into Jamaica’s foreign exchange market amounted to US$167.5 million in September, in a month that usually results net outflows with the ending of the peak tourism summer months.
The heavy net inflows did not prevent the value of the Jamaican dollar from slipping during the month from a selling rate of J$127.57 to the US dollar to J$128.27 at the end of September.
For the entire month, there was only one trading day when there was less foreign exchange bought by dealers than the amount they sold with net sales of US$5 million. In contrast, for September 2015, net inflows amounted to just $6.5 million with 11 trading days of negative flows.
The net purchases for September bring the surplus from July to date to US$436 million.
In July and August, the NIR grew by $250 million to US$2.5 billion, well ahead of the target agreed with the International Monetary Fund (IMF), but the IMF is saying the central bank must continue to build up the NIR which is well off the target of the IMF.
The IMF states “Net international reserves (NIR) stood at US$2.4 billion at end-July, nearly US$500 million above the program target, while gross reserves stood at nearly 80 percent of the IMF’s reserve adequacy metric at end-2015. The BoJ’s FX market sales have declined in recent months, and the net FX purchases including the surrender requirement has been about US$388 million in 2016 (up to end-July).”

“International reserves remain somewhat below recommended prudential needs. Reserves are expected to reach around 85 percent of the IMF’s reserve adequacy (ARA) metric by end-2016, still below the recommended range of 100-150 percent. Moreover, a substantial share of the reserves accumulation was driven by international bond and central bank US dollar CD issuances. The BoJ should continue to steadily purchase FX from the market and limit FX sales to periods of high currency market volatility, while maintaining a market-determined and flexible exchange rate. To further develop the FX market and promote price discovery, the BoJ is working (with the help of IMF TA) on introducing a standard multiple price-auction mechanism for FX sales and purchases with the goal of eventually phasing out FX surrender requirements and using market-based auctions for FX sales and purchases.”
In October 2014 and January 2015 Bank of Jamaica required commercial banks to surrender, in total between thirty percent (30%) to thirty-five percent (35%) up from 25% to £0 percent of foreign currency purchases daily. The surrender requirement to the BOJ for cambios was increased by 5 percentage points to twenty-five percent (25%) of their daily gross foreign exchange purchases from commercial