THE BANK of Jamaica, the central bank, moved yesterday to stem the devaluation of the Ja-maican dollar, by requiring commercial banks, and other institutions licensed under the Financial Institutions Act, to lodge five per cent of their Jamaican dollar deposits with it, from today.
Market players said that the move was already having a positive impact on the Jamaican dollar and was a welcome response to the last few weeks' instability in the foreign exchange market.
In the last few months, and particularly since December 2002, the Jamaican dollar has come under increasing pressure from a combination of factors, resulting in a steady decline in its value against its United States counterpart, despite the BoJ's interventions.
At the end of trading yesterday, the BoJ's weighted average rate reached an all-time high of $51.94 to US$1. Yesterday morning, foreign exchange traders sold the US dollar for as much as $52.10, before reducing the asking price later in the afternoon to around $51.70 after news of the BoJ's new measures hit the market.
The central bank said the measure was being instituted in a context of increased speculation and heightened instability in the foreign exchange market, which has been facilitated by the high levels of Jamaica dollar liquidity in the system. It said it intended to retain the measure until normality was restored in the foreign exchange system.
