THE Jamaican dollar continued to depreciate, sinking to an all-time low last week in spite of intervention by the Bank of Jamaica (BOJ). The central bank last Friday pumped US$40 million into the local foreign exchange market.

The dollar closed the trading week last Friday at $156.78 to US$1. That was a new all-time low. At the start of the week, the US currency was being sold for an average $156.71, which was itself an all-time low. This means the dollar would have declined by $0.07 for the week and therefore depreciated by 0.04 per cent, relative to the US week over week.

The depreciation was primarily due to strong demand and weak supply, which prompted the BOJ to intervene in the market. This has been in line with the trend seen for the past three years, where the local currency would depreciate in January.

NCB Capital Markets reported in its weekly market guide that, “the BOJ had B-FXITT (BOJ Foreign Exchange Intervention and Trading Tool) auctions totalling US$70 million this week, which reduced JMD (Jamaican dollar) liquidity in the market through the sale of USD (American dollar).”

It is anticipated that for the upcoming quarter, the USD money market will remain stable despite changes in market activity affecting liquidity. Market sources say broker market demand for USD remains at 30 days and longer tenured funds, with some brokers offering as high as 4.50 per cent to clients.

In the meantime, manufacturers and exporters are crying out for help whilst highlighting the adverse impact the sliding is having on business. They have called out the BOJ to take the action required to stem the continuing devaluation of the Jamaican dollar.

The Jamaica Manufacturing and Exporters Association (JMEA) says it is deeply concerned about the depreciation. In a news release last week the JMEA said the dollar weakened by one per cent for the first 26 days of 2022 and follows a devaluation of 7.4 per cent for 2021, when the Jamaican dollar slipped from $144.41 to $155.15 against the US dollar.

Arguing that these depreciations have a direct impact on inflation and make Jamaicans poorer as they are less able to afford to purchase the necessities of life, the JMEA called on the BOJ to act now to stem the slide.

The association said it observes that, “the BOJ continues to build up huge foreign exchange reserves which incur a very high cost to the country and these reserves are not being used to support the Jamaican dollar. As of November 2021, the market value of foreign reserves stood at US$4.7 billion, an increase of US$818 million over the last 12 months. And yet, as of August 2021, only US$484 million was used through the B-FXITT system to support the Jamaican dollar.

To further compound the dilemma, the JMEA made the point that “the BOJ increased its policy interest rate from 0.5 per cent to 2.5 per cent, which will ultimately result in a further slowing of an already weak economy. We therefore call on the BOJ to take the action required to stem the continuing devaluation of our currency.”