The Jamaican dollar appreciated slightly week over week by 0.4 per cent, moving from a selling rate of J$156.91 on November 26, to $156.26 on December 3.

This appreciation is attributed to the cyclical movement in the foreign exchange market that is characteristic of the Christmas period. 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.

As for the money market, 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 2nd, a total of J$59.3 billion is in the market, highly concentrated among DTIs.

With the next policy decision on December 20, 2021, it is anticipated further rate increases in the coming months as the Bank of Jamaica (BOJ) attempts to guide the inflation rate back within the target range of four per cent to six per cent.

The decision on another rate hike for December will, however, depend heavily on the inflation outturn for November.

Data on November inflation is 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 J$11.5 billion was offered in the auction while the total bids received was J$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 over-night to 30 days with some brokers offering as high as 4.50 per cent. For the upcoming quarter, the American dollar money market will remain stable despite the expected increase in the demand for the greenback 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.