BOJ building
THE UNITED States dollar exchanged for $64.33 in trading yesterday, which was three cents more than the rate on Tuesday. The local currency has been slipping in value since last Tuesday, when it traded at $63.78 per US dollar. An injection of US dollars the week before had pulled the local currency back from an exchange rate of $64.02 to the US dollar.
Extra demand from investors in foreign currency instruments along with lower than anticipated supply of foreign currency is driving the market, one foreign currency analyst who asked not to be identified said. But overall, he said the Jamaican dollar had only lost 4.18 per cent of its value since the start of the year.
The stabilising influence is the Bank of Jamaica, which intervened in the market yesterday at $64.24 to the US dollar for resale at $64.40, the analyst said. The BoJ interventions serve to satisfy demand from end users such as Jamaica's big industrial and commercial companies, but not that coming from investors.
"Persons are concerned about what is happening in the economy, " he said. The country's budgeted financial targets have not been met and business confidence has weakened.
DEPRECIATION
While the situation should make you, "sit up and look," he said, "I dont anticipate any major depreciation in one month."
The market is unsettled so the BoJ has had to carry out an ongoing series of interventions to help stabilise it. He said the problem is that there is a perception that foreign exchange funds are in short supply, prompting buyers to press the market earlier than the might otherwise have done.
This uncertainty is likely to be alleviated once the tourism season starts and funds start arriving for the bauxite/alumina industry expansion in this quarter or early in the next quarter, he said.
And, given the net international reserves at US$2.1 billion at the end of September, the central bank probably has the resources to keep control of market until then.
