Cyclical movement attributed to appreciation of Jamaican dollar last week
The Jamaican dollar appreciated slightly last week by 0.4 per cent, due to the cyclical movement in the foreign exchange market that is characteristic of the Christmas period.
The dollar moved from a selling rate of $ 156.91 on November 26, 2021 to $156.26 on December 3, 2021.
Prior to the start of the period, vendors stocked up on goods in anticipation of increased demand and as such, there is currently more liquidity owing to lower retail buying.
Foreign exchange market players say that for the upcoming quarter, the American dollar money market will remain stable despite the expected increase in the demand for the green back given the holiday season.
Broker market demand for the American dollar remains at 30 days and longer-tenured funds with some brokers offering as high as 4.50 per cent to clients.
Turning to the money market, Bank of Jamaica (BOJ) data indicate that market conditions remained tight, given the concentration of liquidity amongst deposit-taking institutions (DTIs), as the demand for liquid assets remains high. As of December 2, a total of $59.3 billion is in the market, highly concentrated among DTIs.
With the next BOJ policy decision on December 20, 2021, it is anticipated further interest rate increases in the coming months as the central bank attempts to guide the inflation rate back within the target range of 4.00 – 6.00 per cent. The decision on another rate hike for December will, however, depend heavily on the inflation out-turn for November.
Data on November inflation are expected to be released by the Statistical Institute of Jamaica (Statin) on December 15. The average yield of the BOJ’s competitive auction on its 30 days CD rose eight basis points to 4.19 per cent in the prior week. The highest bid for full allocation was 4.40 per cent.
A total of $11.5 billion was offered in the auction while the total bids received was $19.845 billion. The uptick in yields was driven by the demand for asset yields in anticipation of further interest rate hikes in the near future.
Market players are opting to lend for overnight to 30 days with some brokers offering as high as 4.50 per cent.
— Durrant Pate
