Wednesday, 19th June 2013 | Information reaching IC Insider is that Jamaica’s central bank intervened in the foreign exchange market today by selling US dollars to dealers at $101.45 for resale at $101.50. The last time the country’s central bank intervened to sell to the market was back on October 26 of last year at a rate of $90.98.
To access the facilities at BOJ, banks had to inform the central bank as to the names of the end users and the purpose that the funds would be used for. IC Insider gathers that the intervention created instability in the market.
While the central bank was not active before on the selling side they have been very active on the buying side. On May 22, BOJ intervened to buy US dollars at $99.23, they did so as well on the May 20 and 21 at a buying rate of J$99.13. On May 17 the BOJ bought at $99.03, on May 8 it was at $99.0276, and on February 15 they bought at $95.3564.
The dealers bought the equivalent of US$73.93 million but sold US$135.3 million on a day when the rate on the sell side of all three main currencies decreased with the US dollar selling cheaper by 11 cents, the Canadian 20 cents less and the Pound sterling 90 cents less than on Tuesday.
One source pointed out that all their clients who were waiting to get funds were able to do so today. Another source said that the central bank is of the view that dealers have been holding foreign exchange and the BOJ is using the various tools to get banks to reduce their portfolio of foreign currencies.
It appears that BOJ’s decision to intervene may have started the sell off from yesterday and it accelerated today as the mismatch between buying and selling over the last two days suggests that something extra ordinary has been taking place in the market.
The conclusion may well be that non-financial investors may have sold today with the announced intervention by BOJ, hence the large amount bought by authorised dealers.
