THE depreciation of the Jamaican dollar is expected to taper as the central bank now sees its value compared to the greenback as competitive.

“Future exchange rate adjustments should broadly reflect the difference between the rate of inflation in Jamaica and that of our major trading partners,” said Richard Byles, co-chair of the Economic Programme Oversight Committee (EPOC) at a press conference held at Sagicor Jamaica head office in Kingston yesterday.

He reasoned that the local currency needs only slide roughly six per cent this year to maintain its competitiveness.

The dollar trades at just over $111.30 to US$1 which reflects depreciation of 4.5 per cent since January, according to Bank of Jamaica data.

The dollar depreciated some 11 per cent over the fiscal year ending March 2014.

His expectations are based on the favourable views of BOJ Governor Brian Wynter, also his EPOC co-chair. Wynter holds the tools to influence the exchange rate, primarily by buying and selling foreign currency into the market.

“What the Governor was saying is that we are approaching competitiveness. He’s really signalling and saying, ‘slow down, we are in a better position than last year’,” said Byles about comments made by Wynter at a press conference in May. “More or less he is saying ‘we are at a competitive position’.”

Byles declined to speculate on the absolute exchange rate by year end but reasoned it should hover within the inflation differential between trading partners.

“Inflation in Jamaica in [fiscal year ending March 2013] was slightly over eight per cent while US inflation was about two per cent. This calculates to a competitive gain of approximately five per cent for the Jamaican dollar,” he recalled adding that a similar calculation should follow going forward.

Indeed, respondents to the central bank’s survey on inflation expectations in April indicated that they expected the value of the Jamaican dollar against the US to fall to $112.20 by the end of June; $114.72 by the end of September; and $117.46 by next April.

EPOC met last Friday, and received information on the performance of key economic indicators for the month of April 2014 and the commitments under the Extended Fund Facility of the International Monetary Fund (IMF).

Byles said that the primary balance of negative $1.3 billion for month of April 2014 was better than Government budgeted at negative $1.7 billion and that the Net International Reserves stood at US$1.16 billion at May or better than the US$1.15 billion targeted by IMF.

“Compared to budget, we are off to a reasonably good start for the fiscal year. We will watch the primary balance performance with keen anticipation, particularly in June when it is expected to produce most of the surplus for the quarter,” concluded Byles.