Demand driving forex movement, expect normalcy in near future - BOJ

Bank of Jamaica says it has taken note of the recent movement in the exchange rate and the renewed expressions of concern by some participants about the pace of movement and the availability of foreign currency supply.

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The BOJ says since the start of the year, the exchange rate has depreciated by 3.2%, reversing the appreciation of 2.5% that occurred in December 2019.

The central bank says this recent movement in the exchange rate was related to an increase in demand, as supply conditions have remained normal.

In fact, the average of daily inflows of foreign currency into the market for January to date has been approximately US$31 million, which was greater than the average daily inflows for January 2019, the BOJ noted.

According to the BOJ, the increase in demand has been related, in part, to restocking activities by retailers.

In addition, demand has increased in the context of financial institutions buying on behalf of their customers to fund real sector investments and planned portfolio-related transactions.

Traders have also been buying on their own account since the start of the year to restore their foreign currency positions, having sold more foreign currency to the market than they bought in December 2019.

The BOJ says these transactions are temporary in nature and that it expects the foreign exchange market to revert to more normal patterns in the near future.

It says it will continue to monitor activities in the foreign exchange market and stands ready to take appropriate policy actions if the need arises.

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