The Bank of Jamaica (BOJ), for the third consecutive day this week, intervened in the island’s foreign currency market with an auction of US$20 million for authorised cambios and dealers.
Combined with the previous days’ interventions — US$30 million yesterday and US$40 million on Tuesday — the central bank has so far injected a total of US$90 million in the local economy through Bank of Jamaica’s Foreign Exchange Intervention and Trading Tool (B-FXITT)
These interventions are intended to address temporary demand and supply imbalances in the market, the bank indicated in press releases dated today (November 14, 2019) and yesterday (November 13, 2019).
“…the larger part of BOJ interventions over the past two days has not been reaching end-users due to the unusually large demand to finance foreign currency investments”Bank of Jamaica
However, today the bank issued specific instructions to “authorised dealers and large cambios [to] re-sell all the funds to end-users.
“[An] end-user is defined as non-financial commercial entities that are funding obligations for goods and services acquired,” the BOJ clarified.
While noting that the instructions are not new and have been in place since 2014, the BOJ said, “It has become necessary to reinstate it at this time as the larger part of BOJ interventions over the past two days has not been reaching end-users due to the unusually large demand to finance foreign currency investments.”
BOJ on Tuesday explained that the decline in the value of the Jamaican dollar — and, conversely, the appreciation of the greenback — was a result of “regular re-stocking by retailers for the Christmas season”. However, the central bank gave its assurance that it will maintain orderly conditions in the foreign exchange market and will only intervene to prevent disorderly market conditions.
“Bank of Jamaica is advanced in the development of a trading platform for foreign exchange that will introduce greater transparency. We continue to urge Jamaicans to make use of forward contracts in managing their foreign exchange needs,” the bank said on Tuesday.