Bank of Jamaica sold US$40 million via B-FXITT to authorized dealers and Cambios to augment supply in the market on Tuesday.
“The factors behind the recent depreciation in the exchange rate are well known and Bank of Jamaica expects that these impulses will subside and that normalcy will return to the market. There has been an increase in demand for foreign currency due to the regular re-stocking by retailers for the Christmas season. Further, there has been extraordinary demand relating to portfolio transactions,” the central bank stated in a release today.
“Notwithstanding the recent depreciation, inflows into the foreign exchange market remained healthy. For October 2019, average daily inflow from earners was approximately US$31 million, in line with October 2018. However, driven by the factors noted above, demand has outstripped this supply,” the release went on to say.
The local currency moved in recent weeks and traded at $141.96 to one US dollar on average on Monday as dealers bought US$30.7 million at an average rate of $138.89 and sold $31.5 million at J$141.96 each. On Friday, dealers bought US$33 million at an average price of J$139.49 and bought US$30.2 million at J$141.89.
BOJ sells US$40m into forex market
US$ demand down $1B PA, supply up
Buying of foreign currency demand fell sharply in the first 5 days of December, this year compared with the same period in 2013, at a level that would translate to over $1 billion per year, if sustained.
At the same time purchases by dealers climbed US$4 million, at a rate around US$300 million per annum. According to data compiled by IC Insider from the daily Bank of Jamaica trading reports, a total of $163 million were purchased this week, this compares favourably with the $159 million purchased by dealers in the 2013 period. While dealers sold US$175 million in the first 5 days of December, last year, this year only US$155 million was sold, a fall of US$20 million, this translates to just over $1 billion per year.
The near evenest of inflows and outflows has not stemmed the slippage in the exchange rate versus the US dollar, after a period of slight revaluation between August and October. Bank of Jamaica stepped in by increasing their take from the market from 15 percent per day to 20 percent from November and even intervened on a number of days our source informed us, thus reversing the appreciation of the Jamaican dollar.
The Jamaican dollar ended 2013 at $106.38 to one US dollar and reached $113.79 on Friday, to one US dollar. The slippage since the start of the year is just 7 percent, and is in line with inflation to October and would result in a slight gain in competitiveness in the currency based on inflation differential between Jamaica and the USA, if inflation were to remain around these levels.
Last year December the rate started at $105.87 and ended at $106.38 with most of the slippage occurring in the first half of the month. Flows of foreign exchange usually pick up in the second half of December and is likely to slow the rate of decline, unless Bank of Jamaica determines that the currency needs to slip some more, but they could wait until 2015 to effect any needed adjustment to the rate, with 2014 almost over. With the price of oil well under US$70 per barrel the demand for foreign currency will fall and should allow BOJ to lower interest rates while building up the reserves in the first half of 2015 at least.
J$ stable with US$ gains on others – Monday
The Jamaican dollar was stable against the US dollar but gained against the British pound and the Canadian dollar, on Monday. Authorized dealers purchased the equivalent of US$36,591,367 versus US$39,425,266, on Friday, and sold the equivalent of US$35,704,084 compared with US$31,274,156 on Friday.
In US dollar trading, dealers bought US$29,868,883 compared to US$35,565,489 on Friday. The buying rate for the US dollar dropped 18 cents to $112.95 and US$31,686,958 was sold versus US$29,379,322 on Friday. The selling rate was unchanged at $113.59. The Canadian dollar buying rate climbed 80 cents to $98.63 with dealers buying C$3,954,756 and selling C$3,050,747, at an average selling rate that declined 4 cents, to $99.62. The rate for buying the British Pound rose 17 cents to $176.14, for the purchase of £1,933,114, while £719,301 was sold, the rate fell back 35 cents to $177.84. Other currencies bought, amounted to the equivalent of US$254,759 while the equivalent of US$215,363, was sold.
Highs & Lows| The highest buying rate for the US dollar, closed 5 cents higher at $113.80, the lowest buying rate put on 25 cents to $93.35. The highest selling rate was unchanged at $119.63, but the lowest selling rate fell $1.96 to $93.35. The highest buying rate for the Canadian dollar drifted down 80 cents to $100. The lowest buying rate closed with a 99 cents loss, to $79.60. The highest selling rate remained at $103.90 and the lowest selling rate fell $1.10 to $95.90. The highest buying rate for the British Pound, was off 16 cents to $178.54. The lowest buying rate slipped 58 cents to $143.84, the highest selling rate rose $3.40 to $185.43 and the lowest selling rate fell 70 cents to $173.30.