By Andrew Green, Staff ReporterTHE slippage of 18 cents in the value of the Jamaican dollar against its United States counterpart is no cause for alarm, say foreign exchange market players.
Yesterday saw a weighted average rate of $59.97 with the dollar passing the $60 mark to the U.S. dollar. Although the currency has lost a total of 50 cents since the start of September, industry sources say the fall is moderate, and is to be expected for this time of the year.
"It is a natural thing," said Earle Harriott, an executive with the Cambio Dealers Association of Jamaica. "Although the exchange rate seems to be under a bit of stress, for the last two months, it has been the lowest depreciation for this period that we have had in the last 12 years."
Lissant Mitchell, the assistant vice-president for treasury at Pan Caribbean Merchant Bank, agreed, saying, "The time of the year has something to do with it."
At this point in the year, the island's foreign exchange income from tourism generally falls as the industry goes through a cyclical downturn. But there is no fall in demand and merchants stocking up for Christmas sales tend to increase the demand pressure.
"Round about now, you normally see some movement in the exchange rate," Mr. Mitchell said. With the exchange rate hovering at around the $59 to the United States dollar for the last five months, he said the recent depreciation, "is not that bad."
THREE-PRONGED ATTACK
The government launched a three-pronged attack in May to halt a precipitous slide of the value of Jamaican dollar. During one week alone at the peak of the crisis, the currency depreciated by $6.49, losing more than 10 per cent of its value.
"What is important is the percentage devaluation," said Jason Morris, a Jamaica Money Market Brokers research analyst.
The Jamaican dollar has not lost 2 per cent of its value in the most recent devaluation, Mr. Harriott said. At this time in previous years, he said, "the change might have been five to 10 per cent."
More important than the minor devaluation experienced so far, Mr. Morris said, "is just whether or not you expect the dollar to run away."
The answer to that question is, "No", Morris said. His reasoning is that many foreign exchange users built up reserves during the May crisis, which should ease current demand.
Another reason for optimism is that the central bank has been intervening in the market, Mr. Mitchell said. The last time there was an intervention was on Friday last week.
"It is just to maintain supply in the market, just to fill excess demand, not to so much to keep prices down," Mr. Mitchell said of the Bank of Jamaica intervention. "Their role has changed so much. The emphasis is on providing supply rather than quelling exchange rate movement."
Interest rates in the Jamaican dollar money market are still at attractive levels, Mr. Harriott said. "Investors are not just going to jump out of their Jamaican dollar positions where they can net 24 per cent, to go into a U.S. dollar investment where they are not going to get more than 6 per cent."
One of the most telling signs is that the demand for Jamaican dollars at this point is not as strong as in previous years, Mr. Morris said. "This year is going to be exceptional."
