Watching the FX market

Letters to the Editor

Watching the FX market

Thursday, May 28, 2020

Print this page Email A Friend!


Dear Editor,

In a recent Bank of Jamaica (BOJ) press briefing, held on May 20, 2020, Governor Richard Byles informed the country that projected interventions in the foreign exchange market for the rest of the year could amount to over US$1 billion. This should not cause any major alarm to any players in the foreign exchange market in that the net international reserves (NIR) have been building up over the period 2014 to December 2019 for situations such as this.

Also, our major earners of foreign exchange have either dried up in the case of the tourist industry or earners such as bauxite and remittances have experienced significant reductions in earning.

This is not the first time we will be experiencing a significant reduction in the NIR due to adverse elements in the market environment. The calendar years 2012 to 2013 saw significant reductions in the NIR. The NIR ended the year 2011 at US$1,967.01 billion. This was reduced by over 42 per cent to US$1,132.79 billion in 2012 and further to US $1,047.83 billion by December 2013. Taking a 10-year average (2010 to 2019) of the NIR, this would work out to about US $2.285 billion per year. This would be within the projected decline in the NIR for this year.

Governor Byles and the team at the BOJ, no country has demonstrated full anticipation of the novel coronavirus pandemic. Navigating this economic and health and wellness shock, however, will take very bold and pragmatic leadership, especially from our central bank. This should entail a more proactive approach to market elements. Messages that lack surety of protecting the value of the Jamaican currency will not help to build confidence, but will be sure to fuel even more speculations and further depreciation.

Finally, let us remove the focus from speculation in the foreign exchange market. These are basic elements of any floating exchange rate system. The central bank can, however, minimise such influence by being close to the market, understanding the messages it send and taking proactive approaches in defusing panic.

Michael Clarke

Greater Portmore

St Catherine

mm2clarke@yahoo.com


Now you can read the Jamaica Observer ePaper anytime, anywhere. The Jamaica Observer ePaper is available to you at home or at work, and is the same edition as the printed copy available at http://bit.ly/epaperlive


ADVERTISEMENT




POST A COMMENT

HOUSE RULES

1. We welcome reader comments on the top stories of the day. Some comments may be republished on the website or in the newspaper � email addresses will not be published.

2. Please understand that comments are moderated and it is not always possible to publish all that have been submitted. We will, however, try to publish comments that are representative of all received.

3. We ask that comments are civil and free of libellous or hateful material. Also please stick to the topic under discussion.

4. Please do not write in block capitals since this makes your comment hard to read.

5. Please don't use the comments to advertise. However, our advertising department can be more than accommodating if emailed: advertising@jamaicaobserver.com.

6. If readers wish to report offensive comments, suggest a correction or share a story then please email: community@jamaicaobserver.com.

7. Lastly, read our Terms and Conditions and Privacy Policy



comments powered by Disqus
ADVERTISEMENT

Poll

ADVERTISEMENT
ADVERTISEMENT

Today's Cartoon

Click image to view full size editorial cartoon
ADVERTISEMENT