The Jamaican dollar appreciated last week, as US dollar demand fell off slightly, resulting in the exchange rate falling to $150.26 for US$1 on September 10.

This fall-off in demand was evident by the fact that the Bank of Jamaica (BOJ) reported no foreign exchange Swap Arrangement for the week ended September 10. Also there were no outstanding swaps under the BOJ FX Swap Arrangement.

In addition to the fall-off in US dollar demand, the appreciation in the local currency was also due to an increase in the inflows from tourism and remittances. The BOJ is anticipating the receipt of International Monetary Fund US$520 million in the allocation of Special Drawing Rights (SDR) by end September 2021 could also trigger a further appreciation.

NCB Capital Markets analysts say the injection of the US$520 million in SRD flow will buttress Jamaica’s net international reserves, which will provide support to the economy during the current uncertain economic times.

The allocation is timely, as the recent spike in COVID-19 cases in Jamaica, the subsequent lockdowns and the restriction on non-essential travel from the UK, will likely delay the recovery in the tourism industry and put a strain on the supply of foreign exchange.

The money market for US dollar was generally moderate last week with much of the demand in the broker market being for 30 days and longer tenured fund based on market assessment done by NCB Cap Markets. In contrast, Jamaican dollar liquidity conditions were still tight with some broker market players opting to lend for tenures overnight or up to a week only.

Given the tight liquidity conditions, rates were competitive. The average yield of the BOJ’s competitive auction on its 30 days Certificates of Deposit had an uptick of 1.71 per cent relative to 1.51 per cent in the prior week. The highest bid for full allocation was 1.99 per cent.

A total of J$11.5 billion was offered in the auction, while the total bids received was J$19.46 billion.

— Durrant Pate