THE EDITOR, Sir:
THE FOREIGN exchange rate and foreign exchange market are the most crucial areas for any economic policy directions as both have a significant and direct impact on our standard of living. It is, therefore, most desirable to create and maintain a business environment with minimal opportunities to aid and abet speculation about the future of foreign exchange rates.
The price of foreign exchange is determined and driven by the three major factors, the demand, the supply and the relative strength of the domestic economy that supports its currency. Our economy's overwhelming reliance on all things "from foreign" now has a crushing stranglehold on us, so much so that every cent is being squeezed from our dollar. As the life is being continually squeezed from the dollar (whether for speculative purposes or not) so too is the economy being squeezed to death. In the absence of effective and appropriate monetary and fiscal policies, the earners and holders of foreign exchange will always have an undue influence on both the selling price and the supplies of their foreign exchange and likewise on the demand side, the big buyers with their unlimited amount of local money will also influence the market conditions and market reception.
Even with the bragged-about NIR residual balances at its disposal, the Central Bank's ability to intervene and influence the market seems to be an exercise in futility as "things run we" instead of "we run things". As part of its solid achievement success stories, the Government bragged about the stability of the exchange rate which in October 2002 averaged then at a rate of JA$49.00 to US$1.00. What they conveniently never addressed then and what some of us wanted to have heard, was the issue of the sustainability of that rate which ought to have been underpined by and dependent on solid achievable macro economic policies.
Today, (May 16), the exchange rate is JA$66.00 to US$1.00 (and climbing) and in this context and environment the speculators' propensity to hold onto foreign exchange for the (right price) would increase hour by hour and day by day. Who can blame them when there is a conspicuous absence of feasible and established criteria that should rule the movement of one currency against another.
Where the buck stops is anybody's guess but one thing is for sure, there must be relative stability in the foreign exchange market as it is a major factor that is important for business planning and business confidence.
I am, etc.,
SONIA CHRISTIE
Stewart Town P.O.
Trelawny
