Over the past month the Jamaican dollar has traded with increased volatility and has lost ground to its US$ Counterpart trading with the weighted average selling rate closing at JA$141.89 at the end of trading on Thursday November 7, 2019. For the calendar year to date the point to point depreciation of 9.9% or J$14.17.
While inflows to the market are at the same level as in October 2018, there has been an increase in seasonal demand from end user segment including clients from the Energy, Distributive, Manufacturing Sectors along with portfolio demand from financial institutions.
The recent Balance of Payments data for the June 2019 quarter reflected a current account deficit of US$51.9m which was driven by a significant increase of US$179.5m in imports. This deficit necessitated a drawdown on the Net International Reserves of $67.9m.
Anxiety in the Market
The Private Sector Organisation of Jamaica (PSOJ) does appreciate the anxiety that the Jamaican public will have due to the volatility of the currency and the loss in value of the Jamaican dollar and its impact on the business and individuals.
We also acknowledge that the solution to Jamaica’s FX situation is to increase our earning capacity through exports of goods and services and reduce its import bill through import substitution.
The PSOJ urges the FX Working Committee established and led by the BOJ comprising the Bankers, Cambio dealers and members of the business community to continue its efforts to implement the Electronic Trading Platform and to further develop the Forward Currency market.
Most importantly the BOJ should continue to enhance its market intelligence gathering capabilities and proactive responsiveness to changing market conditions in order to reduce market imbalances which will undoubtedly occur in Jamaica’s small open economy.
Flexible Exchange Rate and Underlying Reforms
Under the Economic Reform Programme Jamaica has adopted a flexible exchange rate regime which has seen the Jamaican Currency moving in both directions.
The BOJ has been moving to bring transparency and price discovery to the market through the following initiatives:
- The introduction of the Bank of Jamaica Foreign Exchange Intervention Trading Tool (B-FXITT)
- The implementation of the interim solution, the Bloomberg Trading Portal, pending the rollout of the Electronic FX Trading Platform. This interim solution gives visibility into the market.
- The BOJ is advanced in the development of the Electronic Trading Platform which will lead to greater transparency to the Financial Institutions and end users.
- Efforts are underway to facilitate the further development of the Forward market for foreign Currency transactions. This initiative needs to be accelerated.
The above initiatives should reduce volatility in the market overtime through increased visibility of transactions in the market and with over time an efficient forward market to hedge positions and reduce the FX risks of the private sector entities and individuals.