The Bank of Jamaica (BOJ) has intervened in the foreign exchange market by selling US$50 million to authorized dealers and cambios to offset what it said was the effects of excessive daily volatility in recent weeks.
That followed the continued depreciation in the value of the Jamaican dollar against its United States counterpart, the average selling rate having moved from $126.46 on November 19 last year to $136.68 as at Thursday, January 31.
Last Friday, the central bank said it sold US$30 million to authorised dealers and cambios via the Bank of Jamaica Foreign Exchange Intervention and Trading Tool (B-FXITT), a rule-based, competitive, multiple-price intervention system to buy and sell foreign exchange to authorised dealers and cambios. The ‘flash sale’ auction, a feature of B-FXITT, followed a similar operation of US$20 million on January 17, 2019, “both of which have been aimed at offsetting the effects of excessive daily volatility in the foreign exchange market in recent weeks,” the bank said.
That notwithstanding, in an advisory to authorised dealers and cambios last Tuesday, January 29, on B-FXITT standard operation, the BOJ said there would be no sales to or purchases from eligible bidders in the four-week period from January 30 to February 20.
Senior Deputy Governor of the BOJ John Robinson explained that the bank publishes a four-week intervention schedule based on information it obtains from authorised dealers and cambios about the need for foreign exchange.
He said that the advisory was an indication from market players that there was no need for the central bank to either buy or sell over the next four weeks.
However, the BOJ usually indicates that if conditions change prior to that and the bank sees a need to buy or sell it, would do so by a flash auction.
Robinson said that based on recent developments and disquiet about the movement in the rate of the Jamaican dollar, the BOJ decided to add liquidity to the market.