Fri | Apr 3, 2020

BOJ conducts third forex flash sale in a week

Published:Friday | February 8, 2019 | 11:54 AM
Rudolph Brown/Photographer 
Governor of the Bank of Jamaica, Brian Wynter.
Rudolph Brown/Photographer Governor of the Bank of Jamaica, Brian Wynter.

The Bank of Jamaica, BOJ, intervened in the market again on Wednesday, the third time during the past week, by selling US$20 million to authorised dealers and cambios in continued efforts to curb the effects of daily volatility in the foreign exchange market in recent weeks.

Earlier this week, BOJ Governor Brian Wynter admitted that there has been a significant slippage in the exchange rate and a sharp increase in up-and-down movements, which he attributed to higher levels of demand for US dollars arising from large capital market transactions.

He said that many of the transactions involve Jamaican companies which were converting their debt into local currency as they take advantage of the exceptionally low interest rates now available.

The central bank’s response to the rapid depreciation in the value of the Jamaican dollar against its United States counterpart were flash operations under the Bank of Jamaica Foreign Exchange and Interventions Tool (B-FXITT) in which it sold a total of US$80 million to the market between last Friday and Wednesday this week.

The weighted average selling rate of the US dollar last Friday, February 1, was $137.06, moving to $137.21 on Monday, February 4, before appreciating to $136.70 by Wednesday.

Senior Deputy Governor of the BOJ, John Robinson, told the Financial Gleaner last week that although the central bank had indicated that there was no need to either buy nor sell foreign exchange to the market under B-FXITT over a four-week period starting in late January, recent disquiet in the movement of the dollar resulted in the flash action.

In his statement this week, Wynter said “we are aware that the concentration of large capital market transactions that we are seeing is, by its nature, temporary and will pass. But although the pressure in the foreign exchange market is therefore temporary and also will pass, we should understand that episodes like these do happen in markets from time to time, especially in markets like ours that are in the process of transformation.”

He reassured the public that “the Bank of Jamaica will not allow disorderly conditions to exist in the foreign exchange market, and will always act to ensure that businesses and individuals can conduct their affairs in a normal way”.

On Tuesday, the BOJ reminded authoriSed dealers and cambios that further to the four-week schedule disseminated on January 29, 2019, the BOJ will not be conducting any standard B-FXITT operation on February 6 and, therefore, will not be receiving applications for the sale and/or purchase of US dollars to or from them.

However, it said the B-FXITT process remains in place, and the BOJ will continue to assess market intelligence and engage with the foreign exchange market as appropriate.