BOJ won't accept disorder in forex market - Wynter
The rapid depreciation in the value of the Jamaican dollar over the past three weeks will not continue in that manner over the rest of the 2013-2014 fiscal year, Bank of Jamaica (BOJ) Governor Brian Wynter assured yesterday.
"That's not going to happen," Wynter said.
However, he said the exchange rate, which closed at J$104.85 to US$1 yesterday, was in line with the bank's expectations.
Wynter said it was also factored into the BOJ's inflation projections.
Speaking in an interview with The Gleaner, the BOJ governor explained that Jamaica was facing a balance of payments problem, and as a result, last fiscal year, the current-account deficit was 12.4 per cent of gross domestic product, or US$1.5 billion to US$2 billion.
To fill the gap, funds had to be borrowed from overseas or otherwise sourced, he said.
However, the economic programme supported by the International Monetary Fund (IMF) is now focused on reducing debt.
Under the programme, Wynter said, the exchange rate has to be adjusted as part of the effort to improve competitiveness for Jamaican businesses.
Another fundamental impacting the movement in the foreign-exchange rate was seasonal in that at this time of year, there is an increased demand for foreign exchange and somewhat less supply, he said.
Asked where the dollar is likely to settle, Wynter said: "You know, that's a question I ought not to answer, because it's important that we have a market-determined exchange rate. We do manage it … because what we won't accept - the BOJ will not accept - is a disorderly foreign-exchange market."
He added: "Movements like the one that occurred in the last two weeks or so, if it continues, we would be having a disorderly market. We are not going to let that happen."
As to whether the fall in value of the Jamaican dollar has been exaggerated to some extent due to sentiments to the fundamentals alone, or both, Wynter said: "That is why we value markets, but at the same time, markets can overshoot. People can be so fearful that they overdo readjustment."
At the same time, Wynter said: "We do want to have a dollar that is competitive, but the level we are at now, there is more fear than there needs to be, that's true, but I hope that that fear will, over time, subside."