The Bank of Jamaica (BOJ) today sold US$40 million to approved dealers and cambios in response to the depreciation of the Jamaican dollar to the US.
The move comes after several weeks of steady decline in the local currency where it traded for as much as J$141.98 to one US dollar yesterday (November 10).
“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”, the BOJ said in a statement today.
“The current account deficit of the balance of payments is expected to remain low and sustainable, albeit slightly higher than the deficit recorded in 2018.”– Bank of Jamaica
Those factors are primarily related to the increased demand during this period as retailers prepare for the busy December period. “There has been an increase in demand for foreign currency due to the regular re-stocking by retailers for the Christmas season,” the BOJ said.
What’s more, it added that “there has been extraordinary demand relating to portfolio transactions.”
Investment manager and microfinancier, Dino Hinds, of MFS Group agreed when speaking to Caribbean Business Report late last week. Hinds said, “I believe that a lot of what is pushing it is portfolio movement as opposed to demand for purchasing goods to sell for Christmas. It is more people converting to US to pay out US loans.”
That said, the BOJ explained that inflows to the foreign exchange market remains healthy with the average daily inflow figure for last month holding at approximately US$31 million, similar to the corresponding period last year.
Even so, demand for US dollar exceeded available supply, however, this is not expected to last.
“Based on Jamaica’s economic fundamentals, the Bank does not expect that the recent pace of exchange rate movement will be sustained. The current account deficit of the balance of payments is expected to remain low and sustainable, albeit slightly higher than the deficit recorded in 2018.”
The Bank said it remains committed to maintaining order in the foreign exchange market and will only intervene to prevent disruptions going forward. It further urged Jamaicans to make use of forward contracts in managing their foreign exchange needs.