THE Jamaican dollar has entered another period of advancement in the foreign exchange (FX) market.

For the second-consecutive week the Jamaican dollar continued to appreciate against the US currency, recording a gain of 0.35 per cent which saw the price of the US dollar move from $155.20 on December 10 to $154.65 on December 17, 2021.

At the close of trading on Monday the dollar appreciated even further, closing at $153.21. The dollar traded at $117.48 for the Canadian currency, $197.43 for the English pound and $187 for the Euro.

Analysts attribute the recent appreciation to an increase in hard-currency inflows of US dollars via remittances as the holiday season approaches, and growing returns from the hotel sector as well as from business process outsourcing firms operating locally.

Additionally, the appreciation last week was aided by a major deposit-taking institution (DTI) offering the US dollar at a rate below $155, given that some end-users are reluctant to purchase above this rate.

For the upcoming quarter, FX market analysts at NCB Capital Market say the US-dollar money market will remain stable despite movement in market activity affecting liquidity. Broker market demand for the American dollar remains at 30 days and longer tenured funds, with some brokers offering as high as 4.50 per cent to clients.

On the Jamaican-dollar money market side, NCB Capital Market analysts say there is relative tightness in market conditions. This is due to the concentrated liquidity among DTIs.

The observed concentration of liquidity across major DTIs is driven by their demand for liquid assets. As at December 16, 2021 a total of $52.34 billion was in the market, highly concentrated among DTIs.

The average yield of the Bank of Jamaica’s (BOJ) competitive auction on its 30-day certificates of deposit (CDs) had a downturn to 4.18 per cent relative to 4.24% in the prior week. The highest bid for full allocation was 4.25 per cent.

A total of $8.50 billion was offered in the auction while the total bids received was $15.9 billion. The rate decline was attributable to the maturing of a CD which was greater than a subsequent reissuance, which resulted in the market participants bidding lower yields.

This is in addition to the Government of Jamaica’s instrument reopening of securities totalling $5.8 billion last Friday, December 17, 2021, with market players reserving liquidity for this auction.

Market players are opting to lend from overnight to 30 days, with some brokers offering as high as 4.50 per cent to clients.