BOJ downplays internal forex split
THE BANK of Jamaica (BOJ) is again pointing to plans to introduce a trading platform that is meant to ensure that Jamaica has a liquid foreign exchange market by facilitating transactions among authorised dealers and large cambios.
It reaffirmed those plans last week as a split in views at the central bank emerged in public view in a sign that exchange-rate volatility was still a rising sore point in the business community.
But most unusual is that differences at the central bank, whether at the level of its committees, board, or executive management, are not usually aired in public. The trading platform is in the process of development. “The main project, in order to integrate that platform with our existing system, will take a little bit. We hope to have it in place by the end of this year so that it can be tested,” said BOJ Senior Deputy Governor John Robinson.
He was responding to Financial Gleaner queries regarding criticisms by businessman Omar Azan, a member of the central bank’s Foreign Exchange Market Development Committee
As the Jamaican dollar edged towards $135 against the US dollar, its main trading counterpart, Azan said on RJR’s radio programme Hotline that the BOJ was not being proactive in managing the impact of extraordinary transactions such as repatriation of profits overseas or a huge bill that entities like state oil refinery Petrojam has to pay.
“They know when it’s coming. They are aware of it and rather than waiting until after to intervene, why not be proactive, knowing the particular transactions?” he asked.
Robinson said Azan’s view was not indicative of the feeling of other members of the foreign exchange committee.
“He may represent views which are those of his associates, not any other member of the committee, I think. It doesn’t make it invalid, but it’s not a common view,” the central banker said.
Asked whether others on the committee shared his view or have expressed similar sentiments, Azan said probably not in the very open way that he has.
“I am very open,” said the businessman, who owns and manages Boss Furniture, on Friday.
BOJ trading data indicate that the currency has depreciated by close to nine per cent since mid-March. The JMD traded at its highest point of $124.79 on March 18 but has since depreciated to $135.86 as at Thursday. Its worst showing, however, was in February when the currency plunged to $137.21 against the USD. Regarding Azan’s criticism that the BOJ was not proactive enough in its market interventions, Robinson pushed back, saying that the central bank does not act on the objective of maintaining a stable rate. “Our approach is not to smooth out every instance of additional demand,” he said. Instead, the BOJ intervenes “when there is a threat that disorderly conditions might develop.”
“We are allowing the market to grow, for people to observe patterns, for people to take advantage of hedging instruments and not to protect everybody from every rate movement,” said the deputy governor. BOJ believes that “liquidity in the market is important so that whenever we see signs that liquidity is drying up, we add [sell to the market], and when we see signs of too much liquidity, we buy. We haven’t done that recently, but that’s our stance.”
Prior to mid2017, the central bank was an active player in the foreign exchange market and would often intervene to stabilise the local currency. The central bank would buy