By Andrew Green, Staff ReporterJAMAICA'S CURRENCY dipped to a new low against its United States counterpart in trading yesterday. This is despite the Government's relatively successful US-dollar indexed bond offered last week. Such bonds would normally have resulted in an appreciation in the value of the currency as investors sold US dollars to move their resources into the attractive investment.
The exchange rate of $54.14 to the US dollar yesterday compares with a rate of $53.80 in trading last week Tuesday. The steady slide since then comes despite the $5.7 billion raised by Government for its 15-month US-dollar indexed bond.
"In normal conditions when an indexed bond comes out, you normally find people selling US dollars to get into this bond," said Anya Schnoor, general manager of Pan Caribbean Merchant Bank. "You didn't find that US dollar inflow that usually occurs, so you found normal US dollar trading," she said.
The 15 month instrument, at 10.50 per cent per annum, was intended to absorb almost $8.5 billion in other instruments maturing last week, said Steven Bruce-Miller, trading manager of Jamaica Money Market Brokers (JMMB). He said it raised $5.7 billion.
This did not translate into an appreciation of the Jamaican dollar, as would normally have been expected, because of the lack of liquidity in the US-dollar fixed income market, Mr. Bruce-Miller said. "There is very little US dollar in the fixed income market out there to borrow."
Whatever affects the Jamaican dollars fixed income market also affects the US dollar fixed income market, Mr. Bruce-Miller added.
"It is appearing more and more that there are fundamental forces at work in the foreign exchange market," said Charles Ross, Sterling Asset Management chief executive. "Those forces are going to have to work themselves out one way or the other. I don't know if any one instrument is going to stop the exchange rate slide."
Foreign exchange inflows that came from the tourism sector are not coming at previous levels, Ms. Schnoor said. As well, the Bank of Jamaica (BoJ) is not actively in the market providing liquidity on a regular basis.
"In the absence of an economy that is earning enough foreign exchange, how do you expect the dollar to remain stable?" asked Ms. Schnoor.
But Mr. Bruce-Miller said the outlook might be better than many think.
Average hotel occupancy levels rose to 82 per cent in February and the economy was relatively buoyant in the last quarter of last year.
"The bad news is out," Mr. Bruce-Miller said, referring to the missed fiscal targets. "The good news has also emerged, but bad news travels faster and farther than good news," he said.
