PattersonPUTTING AN end to the chaotic speculation in the foreign exchange market that has led to the precipitous slide of the Jamaican dollar is expected to be a key focus of Prime Minister P.J. Patterson when he addresses the nation tonight.
Huntley Medley, Mr. Patter-son's press secretary, yesterday said that "The national address by the Prime Minister will be on matters pertaining to the economy and to be included in that, is the situation surrounding the currency market."
Sources close to the Prime Minister told The Sunday Gleaner that, while there will be no roll back of the value of the currency, the plan to be disclosed tonight will bring the slide to an immediate halt.
Mr. Patterson was forced to deal with the crisis after the dollar depreciated by $6.49 or about 10.5 per cent during the past week.
The rapid slip was said to be largely fuelled by speculation as well as general investor uncertainty about the state of the economy.
The movement, against the United States dollar, was by far the most significant decline in value in any single week in recent memory.
The Jamaican dollar has so far lost $15.70 against the United States dollar since the start of the year, about a 31 per cent depreciation that is bound to have a domino effect especially on commodity prices.
At the end of trading on Friday, the dollar fell to an average selling rate of $67.22, about $6.49 more than it was selling when trading opened on Monday last. The weighted average buying rate fell by $6.18 or about 10 per cent higher than the $60.49 at which it was being bought five days before.
Signs of a rapid weakening in the currency became evident around Tuesday when it lost $1.69 in a single day, following a 23-cent depreciation the day before.
By Wednesday, with the U.S. dollar selling for $64.40, it became clear that the Bank of Jamaica (BoJ) had to intervene to correct the run-away depreciation. Dealers said the central bank eventually sold between US$20 million and US$30 million into the market, but that was not enough to prevent the dollar from slipping further to close at its all-time low of $67.22 on Friday.
And as the Jamaican currency lost value against its United States counterpart, there were also concomitant movements in both the value of the Canadian dollar and the British pound sterling.
The Jamaican dollar lost $5.60 against the Canadian dollar during the week, having opened on Monday with a selling rate of $42.86 and closed on Friday at $48.46. The pound sterling picked up $11.05 during the week, opening on Monday at $97.64 and closing at a weighted average selling rate of $108.69.
HIGHEST SELLING RATE
According to data released by the BoJ, the highest selling rate of the U.S. dollar at the close of trading on Friday was $72.50, with the lowest being $59.50. Some dealers sold the Canadian dollar for a high of $51.53, while the pound sterling fetched as much as $116.
On Friday, the Government said that it was not contemplating re-introducing exchange controls to address the sliding dollar. The Government and the private sector in a joint statement issued following a meeting at Jamaica House Friday night, said that both groups agreed that the devaluation of the Jamaican dollar over the past several days was not supported by fundamental economic indicators and was therefore irrational.
"Having taken the decisive move to abolish foreign exchange controls in 1991 and having gone further than any Caribbean country in this regard, the Government is not contemplating exchange controls," the statement said.
Concerns about the depreciation in the dollar has also triggered a meeting between Finance and Planning Minister, Dr. Omar Davies and the Jamaica Bankers Association, the BoJ, Planning Institute of Jamaica and the Financial Services Commission.
MEETING FISCAL TARGET
Dr. Davies said the meeting with the Bankers Association was fuelled by concerns that the Government might not be able to meet its fiscal target, among other things.
However, he has assured the bankers that the Government would be meeting its fiscal target and would do whatever was necessary to do so. During the meeting, Dr. Davies said, steps were also agreed to facilitate greater stability in the market.
The Minister said he was heartened by the concern and positive commitment given by the bankers to work with the Government in an effort to bring calm and stability to the foreign exchange market.
The Prime Minister's address will be broadcast on all radio stations, LOVE and CVM televisions at 8:30 p.m., and on TVJ at 10:00 p.m.
