Bank of Jamaica Building. - CARLINGTON WILMOT/FREELANCE PHOTOGRAPHER
CENTRAL BANK governor, Derick Latibeaudiere, called a meeting yesterday with executives from the island's banks, securities dealers, building societies and cambios to stem the slide in the Jamaican dollar.
The local currency started the year in January at an average exchange rate of $61.76 to the US dollar, remaining relatively stable until June when the monthly average was $61.69. In July however, the currency moved to $62.07, climbing to $62.42 in August and reaching $62.56 in September according to data from the Bank of Jamaica.
On Tuesday the central bank sold funds to the market for J$63.37 to support the local currency. It ended the day at $63.55 to the US dollar.
But yesterday the US dollar sold for as high as J$64.50 at some cambio establishments. The Bank of Jamaica yesterday failed to publish its daily transactions rate yesterday.
SECOND MEETING CALLED
This is the second time in less than two months that the central bank has called a meeting with bankers and securities dealers to stem the pressure on the Jamaican dollar.
While The Gleaner was unable to get any information about the meeting's agenda, it is suspected that Bank of Jamaica (BoJ) is attempting to ascertain whether speculators were involved in manipulation in the foreign exchange market. Said one source, "Such a meeting is unusual and it only happens when the BoJ suspects that there is something happening which they have no information about. Basically they are trying to find out if someone is [manipulating] the market or if it is a natural occurrence."
With the net international reserves at US$2.1 billion at the end of September, the central bank has, in the past, kept up a vigorous defence of the Jamaican dollar. Over the last four months the BoJ has intervened in the market twenty times. At the first meeting with financial sector executives in August, a source told The Gleaner that Mr. Latibeaudiere threatened to push up interest rates if there was any continued pressure on the dollar, supporting the view that the central bank believes that the pressure on the dollar is artificial.
According to the banking executive, "They (BoJ) called the brokers this morning (Wednesday) and said that if there is a demand to come back and tell them the source of that demand - in other words, if there is really a demand come back and prove it."
One foreign exchange dealer said the funds sold into the market by the Bank of Jamaica go to satisfy the needs of the country's big industrial and commercial companies. But investors in foreign exchange denominated financial instruments buy on the open market and can have a significant impact when they aggressively enter the market.
He said demand had been 'excessive' recently, but this was not surprising as many investors were expecting a currency depreciation to compensate for the high inflation which had been experienced this year.
