$100 record! Jamaican dollar weakens against US currency
THE JAMAICAN dollar reached a record high against the United States (US) currency yesterday, the weighted average selling rate climbing to J$100.08, according to the Bank of Jamaica (BOJ) foreign-exchange trading summary.
The local currency also lost ground against the Canadian dollar and the British pound sterling, the weighted average selling rates finishing at J$97.90 and J$155.43, respectively.
Traders sold US$40.4 million for as high as J$104.54, and purchased US$29.5 million, the highest at J$101, the BOJ data revealed.
Just over a year ago, the US dollar was trading at an average rate of about J$86.61, the previous year in the region of J$85.77. It crossed the J$87 mark on February 28, 2012, reached J$88 on May 30, J$89 on July 10, J$90 on October 3, J$91 on October 23, and J$92 on December 5, last year.
According to the historical exchange selling rates provided by the BOJ in a time series of the US dollar versus the Jamaican dollar, in 1971, the US dollar was sold at an average rate of J$0.77.
This moved to J$0.91 on January 17, 1973, J$1.05 on January 13, 1978, J$1.55 on May 9, 1978, reaching J$1.78 by May 2, 1979.
On October 23, 1983, the Government devalued the Jamaican dollar to J$3.15 to the US dollar and, with the continuation of a floating exchange-rate regime, reached J$6.50 by January 1990.
The local currency reached J$8.12 by the end of 1990, plummeted to J$41.49 by January 4, 2000, and to J$67.15 by the close of 2006.
By mid-2009, the currency had climbed to J$89 to the US dollar. It settled in that zone for some time before making some gains, returning to the J$85 mark in 2010.
But by December 2011, after levelling out in the J$86 range, the currency again went into freefall, crossing the J$100 mark yesterday.
Currency depreciation instantly hits consumer purchasing power and reduces wages.
A weaker domestic currency makes imports more expensive, but this could act as a barrier against imports, thus improving the country's trade balance.
Domestic-currency depreciation helps attract more foreign domestic investment. This is so because international companies would find it more attractive to establish businesses in Jamaica.
However, a major disadvantage of depreciation in the value of the Jamaican dollar is that it will increase the burden of servicing and repaying the foreign debt of the Jamaican Government as well as those companies which have US-dollar denominated debt.
- Tracking J$ over three decades
1971 - J$0.77
1980 - J$1.78
1990 - J$6.50
2000 - J$41.49
2010 - J$89.59
2011 - J$85.87
2012 - J$86.60
2013 - J$92.77
Present - J$100.08