Bankers and investment managers suggest that the recent movement of the local currency to the US$1 to JMD$141 range is due in the main to an uptick in the local economy rather than speculators hoarding currency.
Microfinancier, Delroy Josephs says that, “real demand for US dollars is due to people buying goods for Christmas which is the traditional pressure at this time of the year. Also, businesspeople are very upbeat about the economy. From the perspective of sitting and listening to business proposals every day, I can say that the movement of the dollar is not a speculation thing. The entrepreneurial spirit is moving up. Everybody a try a thing. “
Investment manager and microfinancier, Dino Hinds, of MFS Group also commented that it was the real economy that is moving the currency, however, it is more so the activities of the financial sector rather than the retail sector that is pressuring the currency. “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.”
” There was a time when the currency would have moved based on speculation and hoarding. Now it’s about entrepreneurship.”– Microfancier Delroy Josephs
Investment advisor, Neilson Rose also believes that activities in the Jamaican capital markets are also what is driving the movement of the currency. “When companies listed on the Jamaica Stock Exchange declare and pay dividends, many of the larger shareholders tend to be overseas entities. These entities then convert the Jamaican dollar dividends to their home currency and ship it out of the country. This then has an impact on the local currency and I believe that is what is driving the movement at this time.”
Governor of the Bank of Jamaica, Richard Byles, told journalists at the Jamaica Money Market Brokers (JMMB) Thought Leadership Breakfast on Wednesday at the Courtyard Marriott Hotel in New Kingston that US$800 million in portfolio demands, of which some banks are heavily buying hard currency, was creating volatility in the market.
That said, Hinds noted that the push on the dollar, “will have an impact on goods and services and push inflation up. The government might not be concerned just yet, as inflation is at the lower end of the target but eventually it will become a concern.”
Josephs is of the view that rather than worry about inflation at this time, given the low rates, the focus should be on balancing out the import/export situation in the country.
“There was a time when the currency would have moved based on speculation and hoarding. Now it’s about entrepreneurship. From the small man to the big corporate mogul, every next man a bring in a car to sell. People are buying houses. What we need to export more to balance the situation. I really believe that we need to focus on exporting. People are enthused. We need to earn more foreign currency to balance off the demand that is upon us.”