BOJ brands forex auction platform, takes it for test run
The Bank of Jamaica (BOJ) will today be undertaking a pilot of its foreign exchange auction system-branded B-FXITT, in preparation for its full roll out scheduled for next month-end.
Under the new system of weekly auctions, authorised dealers and cambios will be advised beforehand of the amount the central bank will be selling and they will be able to adjust their operations to take into account that certainty of supply, said BOJ Senior Deputy Governor John Robinson.
"This is something that we had planned to move to for some time now, and what it will do is to help us to gauge the amount that we need to supply or buy from the market more precisely and players in the market will be more certain as to when BOJ is in the market, and for how much, whether they are buying or selling," Robinson told Gleaner Business.
He said for those "people who have money to sell and might be waiting for the price to jump ... they will lose that incentive, and people who need to buy will be assured that every week, BOJ will have supply," he said.
As to how the auction could impact the exchange rate, Robinson said "it will help in stabilising it, but it could also make it a little bit more volatile in that it might go up and go down depending on how people behave".
B-FXITT takes effect July 26 when the BOJ will begin selling foreign exchange to authorised dealers and eligible cambios via a competitive bidding process.
All authorised dealers and eligible cambios will be invited to submit bids to purchase foreign exchange from the BOJ at rates that they specify.
The central bank will publish a report from each operation on the same day, including the weighted average exchange rate arising from the operation and will also introduce the publication of midday weighted average exchange rates.
The bank may also sell foreign exchange to authorised dealers and cambios outside of the weekly schedule, if circumstances merit, the BOJ said.
The central bank said the introduction of B-FXITT will not affect the manner or freedom with which members of the public currently purchase or sell foreign exchange.