The Bank of Jamaica (BOJ) Executes 4 Flash Sales since the start of 2019

    JN Fund Managers
    JN Fund Managers
    Bank Of Jamaica

    Since the start of 2019 the exchange rate has moved from J$127.72 per US$ to J$136.70 per US$ on February 6th, 2019. This represents a movement of approximately 7% in a little over five weeks. According to the Governor of the BOJ, Brian Wynter, this bout of depreciation has been driven not just by the standard consumption and commercial activities but from demand stemming from large US dollar denominated capital market transactions. Collectively, this has led to the recent spike in the demand for hard currency in local foreign exchange markets. The Governor also assert-ed that this demand is a positive signal for the economy and that there is no shortage of US dollars locally.

    On February 1st 2019, the BOJ executed their second flash sale for the year of US$30M through B-FXITT (BOJ Foreign Exchange Intervention Trading Tool). A flash sale is an auction that involves the sale of foreign currency to eligible bidders to satisfy a sudden change in market dynamics. On February 4, 2019 the BOJ sold US$30M to the market through a flash sale. However, on the fol-lowing day the BOJ released their four-week schedule which indicated that the central bank would not be buying or selling USD through the standard operations of B-FXITT up to the 27th of Febru-ary 2018. On February 6th 2019, the BOJ sold an additional US$20M to the market through a flash sale. The BOJ’s objectives include the enhancement of the transparency of the local foreign ex-change market and the maintenance of the value of the Jamaican dollar. The central bank has used B-FXITT along with its inflation targeting policy to achieve this in recent times. We anticipate continued 2-way movement in the FX rate due to the inflation differential between Jamaica and its main trading partner, the United States (US) and local demand and supply dynamics.

     

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