BOJ pumps another US$30 million into FX market

BOJ pumps another US$30 million into FX market

Governor says fall in exchange rate is a good economic sign

Tuesday, February 05, 2019

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THE Bank of Jamaica (BOJ), having pumped US$30 million into the foreign exchange market on Friday, announced yesterday that it had injected a further US$30 million into the market, in an effort to ensure that disorderly conditions do not exist.

At the same time, BOJ Governor Brian Wynter said the recent fall in the exchange rate of the Jamaican dollar against its US counterpart is good news for the economy, as it shows that it is improving.

The selling rate for a US dollar was $147.21 yesterday and $137.06 on Friday, compared to a rate of $131.01 on January 21. On Christmas Eve the rate was $128.44.

“There has been a significant slippage in the exchange rate and a sharp increase in up and down movements during the last few weeks. I want to tell you why this is happening and what Bank of Jamaica is doing about it,” Wynter said yesterday via a video release on the BOJ social media platforms.

“Since the start of the year, there have been higher levels of demand for US dollars arising from large capital market transactions.

“Now, I need to point out that these types of capital market transactions are in fact a good sign for the economy,” he said.

“They are only occurring because the economy is improving.”

Apart from that, he said that many of the transactions involve Jamaican companies converting their debt into Jamaican dollars from US dollars, as they take advantage of exceptionally low interest rates that are now available in Jamaican dollars — “another good sign”.

More good news, the governor said, was that foreign inflows — US dollars coming into Jamaica — have not slowed down since the start of the year.

“The effect on the foreign exchange market that we are seeing is because there has been a higher demand for those US dollars as investors and businesses are demanding more.”

He noted that with a flexible, market-determined exchange rate, Jamaica should expect movements in both directions in the normal course of business — something which is in fact becoming a normal feature of the foreign exchange market.

On the question of what is Bank of Jamaica doing to manage the recent increase in up and down movements in the exchange rate, Wynter noted that the BOJ had intervened last Friday to sell US$30 million to the market in a B-FXITT flash operation.

“The bank added another US$30 million to the market this morning (yesterday) in another flash operation,” Wynter announced.

“We are aware that the concentration of large capital market transactions that we are seeing is, by its nature, temporary and will pass,” Wynter said. “But although the pressure in the foreign exchange market is temporary and also will pass, we should understand that episodes like these do happen in markets from time to time, especially in markets like ours that are in the process of transformation,” said the governor.

“With this in mind, I want to reassure the public that Bank of Jamaica will not allow disorderly conditions to exist in the foreign exchange market and will always act to ensure that businesses and individuals can conduct their affairs in a normal way,” Wynter said.

“… All the fundamentals in the economy remain strong. Investments are growing. Unemployment is falling [and] inflation is low. Jamaica’s market rating was recently upgraded. Foreign reserves remain strong, and inflows of US dollars into Jamaica remain robust,” said the BOJ governor.

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