Central Bank introduces new tool to make US$ available to the market

Central Bank introduces new tool to make US$ available to the market

FX Swap Arrangement tool to work in tandem with B-FXIIT

Sunday, January 26, 2020

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The Bank of Jamaica (BOJ) will be pumping more US dollars into the foreign exchange system through a new instrument called the FX Swap Arrangement.

This new arrangement will be available to foreign exchange Authorised Dealers (ADs) and will work in tandem with the usual B-FXITT operations, where the BOJ, Jamaica's central bank, buys and sells FX to ADs and Cambios through this rule-based, competitive, multiple price intervention system.

The FX Swap Arrangement is intended to enhance the BOJ's management of the foreign exchange market and provides USD liquidity to the market through ADs via a swap arrangement.

On Wednesday the BOJ issued a notice regarding the introduction of the new instrument.

News of the new measure to release more hard currency to the FX market comes a week after the Jamaica Manufacturers and Exporters Association (JMEA) raised alarm over a shortage in the supply of foreign currency to the productive sector and price volatility in the foreign exchange market

Under the FX Swap Arrangement, the BOJ will sell US dollars to ADs, within a pre-determined limit, at the prevailing market rate, with an agreement to buy back the same amount of US dollars at a time in the future at an agreed forward rate. In addition to its usual B-FXITT operations, the BOJ will utilise the FX Swap Arrangement to smooth out excess volatility and restore orderly conditions in the market.

In a statement issued last week the JMEA said, “the association is alarmed at yet another round of high volatility and unavailability of foreign currency in the market.” “During December the Jamaican dollar revalued dramatically to $131 and now, with less than two weeks gone in the new year, not only has the Jamaican dollar lost over three per cent of its value (and climbing) but it is also not available,” the statement continued.

According to the JMEA, the inadequate supply and rising price of FX currency has disrupted the productive sector as many companies are unable to carry out normal business and meet obligations to suppliers. The organisation, therefore, emphasised that the unavailability of funds creates an untenable situation which poses a risk to business confidence, the country's growth agenda, and the viability of companies.

— Durrant Pate

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