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Wednesday, December 12, 2007
When it fell by US$116 million (J$8.29 billion) last month, the Net International Reserves (NIR) dropped to the lowest it has been in over three years, pushing the total decline in the reserves since the start of the fiscal year to US$521 million or 22 per cent.
The Bank of Jamaica (BOJ) last week reported that the NIR stood at US$1.81 billion (J$129.4 billion), representing 10.95 weeks of goods and services imports, based on projections for current fiscal year, which began April 1.
The reported figure is the lowest the reserves has been since September 2004 when it stood at US$1.62 billion.
Last month the BOJ governor, Derick Latibeaudiere, in his quarterly monetary policy briefing, said that major foreign exchange demand-supply imbalances fed by high liquidity in the domestic market had created pressure on the central bank, which responded by selling significant sums of foreign currency to the market.
He estimated the net selling to the market at US$191.2 million during the three months to September 30, which was "significantly above the amount sold in the June quarter".
"The instability in the foreign exchange market was aggravated by the high level of liquidity in the system," said the central bank governor. "As a consequence, the BOJ was very active in the financial markets during the quarter, selling significant sums of foreign currency to alleviate the demand pressures. The bank also offered attractively priced Jamaica dollar instruments during the quarter to absorb excess Jamaica dollar liquidity."
Disruption caused by the hurricane in August and the uncertainty surrounding the general election, which was held on September 3, coupled with continuing increases in global commodity prices, particularly crude oil and grains, delays in the implementation of a number of projects and the uncertainty regarding the availability of Jamaica dollar instruments with the desired hedging features were other factors that had a negative impact on the foreign exchange market.
The reduction is viewed by some, such as Charles Ross of Sterling Asset Management, as a "positive development".
"It could be a positive developemnt in terms of cost of monetary policy," Ross told the Business Observer. "By selling currency rather than issue instruments to reduce liquidity, the bank can keep down interest payments and it would have booked gains on those sales."
BOJ's balance sheet as at November 14 showed $4.79 billion year-to-date profit in amounts due to the government.
When it fell by US$116 million (J$8.29 billion) last month, the Net International Reserves (NIR) dropped to the lowest it has been in over three years, pushing the total decline in the reserves since the start of the fiscal year to US$521 million or 22 per cent.
The Bank of Jamaica (BOJ) last week reported that the NIR stood at US$1.81 billion (J$129.4 billion), representing 10.95 weeks of goods and services imports, based on projections for current fiscal year, which began April 1.
The reported figure is the lowest the reserves has been since September 2004 when it stood at US$1.62 billion.
Last month the BOJ governor, Derick Latibeaudiere, in his quarterly monetary policy briefing, said that major foreign exchange demand-supply imbalances fed by high liquidity in the domestic market had created pressure on the central bank, which responded by selling significant sums of foreign currency to the market.
He estimated the net selling to the market at US$191.2 million during the three months to September 30, which was "significantly above the amount sold in the June quarter".
"The instability in the foreign exchange market was aggravated by the high level of liquidity in the system," said the central bank governor. "As a consequence, the BOJ was very active in the financial markets during the quarter, selling significant sums of foreign currency to alleviate the demand pressures. The bank also offered attractively priced Jamaica dollar instruments during the quarter to absorb excess Jamaica dollar liquidity."
Disruption caused by the hurricane in August and the uncertainty surrounding the general election, which was held on September 3, coupled with continuing increases in global commodity prices, particularly crude oil and grains, delays in the implementation of a number of projects and the uncertainty regarding the availability of Jamaica dollar instruments with the desired hedging features were other factors that had a negative impact on the foreign exchange market.
The reduction is viewed by some, such as Charles Ross of Sterling Asset Management, as a "positive development".
"It could be a positive developemnt in terms of cost of monetary policy," Ross told the Business Observer. "By selling currency rather than issue instruments to reduce liquidity, the bank can keep down interest payments and it would have booked gains on those sales."
BOJ's balance sheet as at November 14 showed $4.79 billion year-to-date profit in amounts due to the government.
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