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Bank of Jamaica to watch deals which could influence foreign exchange market

Governor of the Bank of Jamaica (BOJ), Richard Byles, reported that between October 1 and November 12, 2019 the Jamaican currency lost 5.2 per cent of its value or traded by $7.07 less.

Bank of Jamaica Governor, Richard Byles. (Photo: Caribbean Business Report/Shaquille Brooks)

Byles said this was due to, “the spike in demand for foreign currency related to portfolio transactions, combined with seasonal restocking by retailers ahead of the Christmas period. In response, the BOJ acted to enhance the US dollar supply by selling a total of US$140 million to the market between October 18 and November 14, 2019.”

“Now, going forward, we will partner with the FSC to review the deals before they are executed to discuss the impact on the foreign exchange market.”

– Bank of Jamaica Governor, Richard Byles

That said, Byles noted, “we don’t want to keep selling to the market.  We only intervene if the market becomes erratic.”

Additionally, he said commercial banks played a major role in creating the recent erratic marketplace for currency. “We have had conversations with the commercial banks and asked them to be responsible. We know that timing is key. We want them to consider forward marketing buying of currency as we believe that is key.  They (the commercial banks) run this market and so we are awaiting their response. We asked for a plan from them two to three weeks ago. We want the commercial banks to work with us to create stability in the market.”

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

Noting that large transactions drove major demand for currency by the commercial banks, Byles said going forward, “large one time transactions must be looked at in collaboration with the Financial Services Commission (FSC). Part of the problem we had recently was that the deals were already approved. So we were late on that. Now, going forward, we will partner with the FSC to review the deals before they are executed to discuss the impact on the foreign exchange market.”