Big business cautiously optimistic about Jamaican dollar appreciation
Both the Private Sector Organisation of Jamaica (PSOJ) and the Jamaica Manufacturers' Association (JMA) are crediting the recent appreciation of the Jamaican dollar to positive macroeconomic indicators.
The Jamaican dollar reached a high of $129.21 against the US dollar on October 25 but has been slowing inching up in value. The JMD traded at $128.84 on Wednesday.
"We are cautiously optimistic that there is movement in the right direction. We are happy to see that, and in any market system, there should be movement up and down," said JMA President Metry Seaga.
"I think we need to say it and shout it as loud as we can when there is revaluation so that people who are hoarding dollars, who are keeping them for speculative reasons, cannot afford to so do anymore."
For too long, he said, "we have created this self-imposed problem for ourselves and I think when it's moving in the right direction ,we need to shout it as loud, if not louder, than when it's moving in the wrong direction."
Asked what he thought was contributing to the appreciation, Seaga said: "In our opinion at the JMA, the economic indicators are right. Inflation is down. Employment is up. Our reserves are up. Our balance of payments is good. There is no economic reason for the dollar to be depreciating."
Just last month, the JMA convened a forum at its Kingston office with the governor of the Bank of Jamaica (BOJ) aimed at allaying the concerns of businesses at a time when the local currency appeared on a persistent down-ward path.
Seaga's tone was a lot more positive this week.
"We are very optimistic about what's happening and hope it continues. We know that the dollar is round about at its correct level. So we expect small movements one way or the other, and that's how it should be," said the JMA president. "As business people, what we need to do is to be able to plan," he added.
PSOJ Chief Executive Officer, Dennis Chung, noting that the umbrella private sector lobby had indicated that it was concerned about the continued depreciation of the dollar, said he believed that BOJ Governor Brian Wynter and central bank officials had taken steps to halt the runaway depreciation, "and I think that is what has caused the revaluation somewhat to happen."
In addition to that, there is greater confidence in the economy, he said. "One of the points that we had made also recently is that we didn't expect it to continue as is because in markets, especially when you have a floating rate, things go up and down."
Moreover, "at the time when the dollar was devaluing, the US dollar was getting stronger against every currency in the world. So it's just a global impact in many respects," said Chung.
He said that the PSOJ recently conducted an analysis which showed that based on the macroeconomic indicators, "there was no indication that the rates should have been moving like that - the balance of payments, the fiscal accounts, inflation, everything showed that it would have stabilised soon."
A foreign exchange market working group was recently established, at the request of Finance and Public Service Minister Audley Shaw, to address the depreciation of the Jamaican dollar.
The BOJ governor, addressing a briefing in Kingston recently, said that against the background of the Government's policy of maintaining a flexible, market-determined exchange rate, the working group, which he chairs, is a consultative body representing a cross-section of participants in the foreign exchange market, in addition to public officials, and is intended to facilitate greater two-way communication between the public and private sectors.
However, Chung said that the work done by the Governor and the BOJ to halt the depreciation had been undertaken before the working group's formation.