File
The Bank of Jamaica building, Nethersole Place, Kingston. The Central Bank has sold U.S.dollars into the market about two dozen times since the year started to ease demand pressures on the Jamaican currency.

Ashford W. Meikle, Business Reporter

Pressured by high broker demand and excess Jamaican dollars in the system, the Bank of Jamaica (BoJ) intervened in the local foreign-exchange market Tuesday to reduce the pressure on the local currency, selling to its dealers at $68.52 for resale to end users at $68.57.

The central bank's actions come a week after the market's lukewarm response to its special two-year variable rate instrument, which was designed to mop up excess liquidity in the market.

"I don't think the variable bond that was issued last week - was taken up as much as they had hoped," a source told Wednesday Business.

By contrast, the 90-day and 182-day Treasury Bill offers were oversubscribed.

"Strangely enough, there is still a lot of money out there, hence the pressure on our local currency," noted the source.

On Tuesday, when the central bank intervened, the dollar closed at $68.60; it dropped three cents Wednesday but closed back at $68.60 on Thursday.

Vigorous defence of local currency

Backed by net international reserves at a healthy US$2.25 billion at the end of May, the Bank of Jamaican has maintained a vigorous defence of the local currency, limiting its slide by entering the market over two dozen times since the start of the year with direct sales totalling hundreds of millions of U.S. dollars.

Since the start of the year, the dollar has slid some 1.83 per cent against its U.S. counterpart and analysts expect local currency to slide even further for the rest of the year, given the imbalance in the country's balance of payment accounts, with imports doubling exports.

Last week, a senior banker attributed the pressure on the dollar to speculation by cambio dealers and brokers who apparently had short-positioned themselves and were looking to recover.

"There isn't much demand coming from the retail, end users," said the banker.

However, a source close to the Cambio Dealer's Association downplayed the BoJ's actions, noting that there would always be a demand for U.S. dollars as oil prices remain high.

"It's nothing major, nothing specific for the central bank's intervention. The situation is challenging but our market has deepened and managing it is not as easy as it used to be; the amount of money that is moving out there now is a lot more than it used to be," the source said.

"It's one of the challenges of being a developing country where you have to import almost everything."

ashford.meikle@gleanerjm.com