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J$125.44 to one US - Slide excessive says Wynter

KINGSTON, Jamaica – The Jamaican dollar on Friday, May 27, ended trading at J$125.44, up by two cents, according to the Bank of Jamaica’s daily foreign exchange trading summary.

Meanwhile, the Canadian dollar ended trading at J$96.45, up from J$96.30, while the British pound sterling ended trading at J$183.76, up from J$182.27.

BrianWynterOn Thursday, BOJ Governor Brian Wynter proclaimed that a 0.9 per cent depreciation in the rate of exchange between the Jamaican and United States dollar in April and a 1.8 per cent decline so far in May was excessive and not supported by prevailing economic conditions.

It's a view that confirms the concerns expressed by some in the business community that the currency has been decelerating at too rapid a pace.

Wynter said the pressure on the foreign exchange rate since April appeared to have been influenced by specific financial account transactions and their impact on market pricing.

The most significant of those "appears to have been the prospect of a large US dollar bond issue in the local capital market by a foreign financial institution," Wynter told his quarterly press briefing at the BOJ's offices in downtown Kingston on Thursday.

"This stimulated additional demand for foreign exchange and influenced expectations of further depreciation."

The BOJ governor said the bank's assessment, supported in recent statements by the International Monetary Fund (IMF), is that the Jamaican dollar, which traded at $125.42 to the US dollar on Wednesday, is now fairly valued.

In maintaining that position, the exchange rate can be expected to move in line with the difference between Jamaica's inflation rate and that of its main trading partners, he said.

Wynter said that assessment reflected the substantial gains in external price competitiveness that had been achieved over the past four years, noting that, in addition, the current account of the balance of payments at current levels is sustainable.

The estimated current account deficit of 2.2 per cent of gross domestic product (GDP) for fiscal year 2015-16 was more than covered by the inflows of foreign direct investment, estimated at 5.8 per cent of GDP, the Governor said.

The BJJ's forecast is for the current account deficit to remain within the range of two to three per cent of GDP in fiscal year 2016-17.

The Bank of Jamaica (BoJ) earlier in the week, said it would be maintaining a presence in the foreign exchange market until it settles.

According to Finance Minister Audley Shaw,  “This presence underscores the Government’s commitment to ensuring orderly conditions in the foreign exchange market within the context of a flexible exchange rate regime.”

There has been a noticeable increase in the pace of depreciation of the Jamaican Dollar since mid-April 2016, following an almost unchanged exchange rate during March and early April 2016.

The Finance Minister explained that the faster pace of depreciation in recent weeks has been driven predominantly by large portfolio-related transactions and is not reflective of a deterioration in underlying economic fundamentals or confidence.

“Let me stress that there is no shortage of foreign exchange in the country. The country’s international reserves have also remained healthy and continue to exceed benchmark levels,” Mr. Shaw said.

 

Last modified onSaturday, 28 May 2016 09:42

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