Friday, 31 May 2013 | The local foreign currency market seems odd at best. There is more buying by financial institutions than they are selling, to the extent that they are picking up the currency for less than the did yesterday but buyers form these institutions are buying at higher and higher rates. The amount of currency bought on Friday amounted to US$30.46 million and the equivalent of US$28.1 million were sold. For the entire week the authorized dealers bought $16.8 million more than they sold with only Monday being a day of sales exceeding purchases. The signals are at best conflicting.
Oblivious to some traders is the fact that the country’s central bank is using open market methods to mop up excess liquidity from the system. Additionally, although the IMF or some executive may say the Jamaican dollar is still overvalued and adjustments are needed is not to say that the currency needs to move in nominal terms. There are other methods that can get greater level of competitiveness in the system. One such is tax reform that can lower the cost of production if properly applied, another is to allow the recent tax package and the effect of government reducing their spending to have moderating effect on inflation and therefore improve the competitiveness of the currency.
Regardless the selling rate for the US dollar climbed today by 11 cents to close at J$99.45, the pound sterling climbed 97 cents to close at J$151.29 and the Canadian closed at $96.48 up just 6 cents. But while Jamaican were paying more for funds from the institutions that trade in foreign currencies the finance houses were paying the public less for the funds. In the case of the US dollar it was 3 cents less , 55 cents less for the Canadian and 34 cents less for the pound sterling. Is the public more knowledgeable than the banks and cambios?