By Andrew Green, Staff Reporter
Prime Minister P.J. Patterson (right) and Finance Minister Dr. Omar Davies on their way to yesterday's press conference at Jamaica House. - Rudolph Brown/Staff Photographer
THE JAMAICAN dollar gained $1.75 against the US dollar in trading yesterday, as the Prime Minister's Sunday night talk added credence to a Bank of Jamaica (BoJ) market intervention yesterday.
The average selling rate was $65.47 to the US dollar yesterday, following a slide of $9.92 against the US dollar for the month up to Friday last week. The average selling rate yesterday was $106.29 to the British pound, a gain of $2.40. But against the Canadian currency, the Jamaican dollar still lost 37 cents, trading at $48.83.
The BoJ sold an undetermined amount of US dollars into the foreign exchange market at $65.95 to the US dollar yesterday. The Prime Minister on Sunday had promised that the BoJ would use the country's Net International Reserves (NIR) to supply foreign exchange to the market and he said the Ministry of Finance would also issue an 'indexed bond' to show confidence in the Jamaican currency.
ORDER TO THE MARKET
"This will continue until we bring further order to the market," Finance and Planning Minister Dr. Omar Davies said at a Jamaica House press conference yesterday. The press conference was attended by Prime Minister P.J. Patterson and Information Minister Burchell Whiteman.
"It was not just the fact that the BoJ intervened but that the Prime Minister made his speech," said Chebiche Campbell, manager of foreign exchange trading at Pan Caribbean. "I guess a lot of end users are waiting out the market. They are expecting further appreciation of the dollar so they are not jumping in to buy."
An additional reason for the strengthening currency was the soon-to-be-introduced indexed bond, said Cambio Dealers Association executive member Earle Harriott. Indexed bonds have normally been linked to the US dollar, giving investors security against devaluation.
"We believe that the (exchange rate) movement is not justified," Prime Minister Patterson said, in justifying the intervention. "We can and have intervened in the market by the use of the NIR. And there are also some policy tools at our disposal which we have used in the past and which we will use in the future and new tools may have to be developed to deal with the new situation."
The intention of the Government action is to return the exchange rate, "to something which can be justified in the context of economic performance and the availability of foreign exchange," Dr. Davies said.
