The Bank of Jamaica (BoJ), on Friday (February 1), sold an additional US$30 million to authorised dealers and cambios, via the BoJ’s Foreign Exchange Intervention and Trading Tool (B-FXITT).
This follows the sale of an initial US$20 million, both of which, according to a statement from the Bank, were aimed at “offsetting the effects of excessive daily volatility in the foreign exchange market in recent weeks.”
The BoJ indicated that while gross foreign exchange inflows have remained buoyant, resulting in no currency shortage, information surfacing suggests that several firms are seeking to borrow funds in foreign currency from the local capital market.
The Bank said this, coupled with “normal commercial demand,” has led to increased demand and recent price movements.
It pointed out that these temporary gaps between demand and supply are “normal in a market,” adding that with more than adequate foreign exchange reserves, it “stands ready to address these gaps when required.”
The BoJ emphasised that efficient intervention and oversight of the market rely on information it receives from foreign exchange dealers who, in turn, depend on client feedback for same.
The Bank said while this information flow has been improving, “a lot more improvement is still needed.”
It contended that more foreign exchange users need to advise their dealers in advance of their intention to buy or sell the currency.
This, the BoJ added, will enable dealers and the Central Bank to be better informed about market needs and prepared to act accordingly.
“Businesses are being strongly encouraged to use forward contracts with their dealers to manage their foreign exchange transactions. Fluctuations in the rate can be inconvenient, but it is those very fluctuations which create the opportunity for using forward contracts to manage foreign exchange transactions more efficiently and to plan more long term,” the Bank further stated.