BOJ sold US$30m to FX market on Friday
Bank of Jamaica introduced a bidding system when they intervene in the foreign exchange market officially called “Foreign Exchange Intervention and Trading Tool (BFXITT).” The system was introduced in 2017 with the central bank buying and selling funds in the market whereby authorized dealers and Cambios had bid for the amounts on offer.
Friday’s intervention was to address temporary demand and supply imbalances in the market Jamaica’s central bank stated. Friday’s intervention is the first being made since the central bank intervened with two flash sales on July 18 and 19th this year with a total sale of US$35 million and prior to, US$30 million on July 11. In 2017 and 2018 the central bank had regular weekly scheduled interventions in the market from August to October and November, but there has been none in 2019 after BOJ lowered the amount dealers had to surrender to the central bank from amounts they bought weekly.
The amount offered for sale on Friday attracted 42 bids amounting to US$72.6 million but just 17 were accepted with the highest bid at $139.15 and the lowest at $137. Bids at $138.65 got 33.33 percent of the amount applied for.
The intervention comes against the background of the country’s Net International Reserves climbing US$162 million, from US$2.936 billion at the end of August to US$ 3.098 billion at the end of September.
BOJ FX auction rate drops $1 to $132.75
The average rate for the sale of the US$10 auction sale by Bank of Jamaica in its regular B-FXITT Standard Intervention on Wednesday, fell by $1 to $132.74 this week from $133.75, in the previous week’s auction.
The central bank offered US$10 million to eligible bidders that attracted 31 bids amounting to $21.5 million, 17 bids were accepted and resulted in an average rate of $132.74. the out turn suggest that rates in the spot market for foreign exchange could decline in the next series of trading.
Interestingly, the highest bid was priced at $133.90 and the lowest at $130.83. The lowest bid that was successful was at $132.30 and received just 16.3 percent of the amount applied for.
The final scheduled auction for October will be on the 17th when US$10 million will be auctioned.
In trading on the foreign exchange market on Tuesday, dealers bought $46.28 million in US dollar currency at an average of $132.39, slightly below the rate in today’s auction. Dealers sold US$46.94 million at an average rate of $133.34 overall, trading of all currency amounted to just over $55.3 million for both selling and buying. In trading on Monday, US dollars purchase amounted to just US$20 million at an average rate of $131.11 and sale of US$34 million at $133.99.
On Monday overall, trading of all currencies, amounted to just over $25 million and US$36.74 million, buying and selling respectively.
BOJ buys $5m at J$133.65
The rate Bank of Jamaica paid on Wednesday, July 25 to purchase US$5 million in the B-FXITT Standard Intervention Tool – buy operation average J$133.65.
Eligible dealers placed bids to buy only $5.5 million with the highest priced offer at 137.24 to sell $200,000 and the lowest at $126 for $200,000. BOJ purchased funds as high as $137.10 amounting 40 percent of the amount offered while the amount of $350,000 that was offered at $137 was fully taken up. Eligible Offers were received from 19 sellers while 18 had funds bought.
The central bank will buy US$5 on Wednesday July 31 and August 8 and will sell $10 million to the market on August 19.
More recovery for Jamaican$ – Friday
The Jamaica dollar gained further ground at the close of foreign currency trading on Friday against the US and the Canadian dollars and the euro as volumes increased over the previous week.
Dealers bought US$201 million in all currencies, up from US$191 million bought in the previous week and sold US$217 million, compared to US$210 million in the prior week. Actual US dollar purchases by dealers amounted to US$178 million from US$166 million in the prior week and sold US$190 million including US$15 sold to Bank of Jamaica in the BFXITT auction, compared to US$184 million previously.
Inflows of all currencies amounted to the equivalent US$35.26 million compared to US$34.79 million bought on Thursday and sold US$37.86 million compared to US$31.28 million sold on Thursday.
At the close of foreign currency trading, dealers sold US$29.69 million, 4 cents less than on Thursday with the US dollar selling rate closing at J$125.53, compared to J$125.57 in the sale of US$27.16 million on Thursday. Purchases of the US currency by dealers, amounted to US$29.47 million, with the average rate dropping 55 cents to $123.75, compared to US$32.90 million, with the average rate of $124.30 on Thursday.
At mid-day on Friday dealers purchased US$8.2 million at an average rate of J$124.37 and sold $7.46 million at an average of J$125.44. At mid-day on the previous trading day, dealers purchased US$12.17 million at an average rate of J$124.70 and sold $7.66 million at an average of J$125.49.
The Jamaican dollar closed trading, with the selling rate for the Canadian dollar, declining to J$100.96 from J$101.70 at the close on Thursday. The selling rate for the British Pound rose to J$174.7 from J$173.57 previously and the euro fell versus the Jamaican dollar to J$152.09 to buy the European common currency, versus the prior selling rate of J$152.63.
Dealers sold US$4M in BOJ FX auction
The first BFXITT auction on Wednesday in which Bank of Jamaica offered to purchase purchased US$5 million, attracted 12 offers and fetched just US$3.95 million at an average rate of $125.42.
The highest bid was at $126 to sell US$500,000 with the lowest being $124.50 at which US$500,000 was traded. The rate compares with an average sale of $13.42 million in the overall market up to Midday at an average of J$1215.24.
The central bank started the BFXITT auction in July last year, only selling the US dollar to dealers before today. The bank has scheduled buying US$12 million on April 18 and US$15 million April 25, no trade is announced for the first week in May. The buying of the US dollars in the auction comes against the back ground of a revaluation of the local dollar to $125 after slipping to just over $128 to the US dollar in March. At a recent briefing relating to the commencement of buying through the BFXITT system as part of dissemination information, the Governor of the central bank, Brian Wynter indicated that the decision to buy or sell is based on market intelligence provided by the dealers through their customers.
The commencement of buying of foreign currency through BFXIIT auction also comes at a time that the central bank has reduced the percentage that it used to take from the daily inflows into the market and the planned phasing out of compulsory surrender requirement by authorised dealers.
No B-Fxitt sale by BOJ in December
There are unlikely to be any sale of foreign exchange by Bank of Jamaica during December, a release from the central bank suggests.
According to Jamaica’s central bank “market intelligence provided by authorised dealers and cambios on prevailing and prospective market conditions indicates that there is no need for the Bank to add foreign exchange to the market during the first two weeks of December 2017. The B‐FXITT process remains in place and Bank of Jamaica will continue to assess market intelligence going forward and engage with the foreign exchange market as appropriate.
The amounts the central bank made available in November was reduced to US$4 million per auction down from a usual amount of $10 million in the past. Based on historical tends with increase inflows into the system from Mid-December is very unlikely that the central bank will be doing much selling and could in turn start the auction to buy surpluses from the market which is expected to occur from December until April next year.
The change comes against the back ground of Bank of Jamaica reducing their compulsory take from 25 percent to 20 percent which will result in between US$40 and $50 million more available for the public on a monthly basis as well as a clear sign of sell off of foreign exchange by dealers from October.