BOJ makes US$20 million intervention in FX market

Friday, April 12, 2019

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BANK of Jamaica (BOJ) intervened in the foreign exchange market on Monday with an injection of US$20 million.

The money was sold to authorised dealers and large cambios aimed at smoothing temporary gaps between the supply and demand in the market.

“In an environment where the exchange rate moves in both directions, Bank of Jamaica continues to urge businesses to use forward contracts with their financial institutions to minimise the risks associated with foreign exchange obligations,” BOJ cautioned in a statement on Tuesday.

Applications were opened by Bank of Jamaica on Monday for the Foreign Exchange Intervention and Trading Tool (B-FXITT) — sale operation for allocation to eligible bidders for settlement on Tuesday, April 9, 2019.

According to the Central Bank, it received a total of 139 eligible bids valued at US$45,650,000. The operation amount of US$20,000,000 was sold at weighted average price of $130.85 for US$1.

On Tuesday, the US currency climbed 0.12 per cent to US$129.56 to US$1 over Monday's $129.41 to US$1, representing year-to-date change of 1.25 per cent. Yesterday, the dollar traded at $130.66.

The Central Bank's intervention on Monday follows a similar operation of US$20 million conducted on February 6, 2019.

During the same month, the BOJ pumped US$30 million into the foreign exchange market and later injected a further US$30 million into the market, in an effort to ensure that disorderly conditions did not exist.

In commenting on the previous flash auctions, BOJ Governor Brian Wynter said the recent fall in the exchange rate of the Jamaican dollar against its US counterpart is good news for the economy, as it shows that it is improving.

“Since the start of the year, there have been higher levels of demand for US dollars arising from large capital market transactions. Now, I need to point out that these types of capital market transactions are in fact a good sign for the economy. They are only occurring because the economy is improving,” Wynter said in February.

The governor noted that many of the transactions involved local companies converting their debt into Jamaican dollars from US dollars, as they take advantage of exceptionally low interest rates that are now available in Jamaican dollars — “another good sign” for the economy.

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