Durrant Pate/Contributor

Financial market analysts are projecting further strengthening of the local currency this month, even though February ended with the JMD depreciating modestly against its American counterpart in trading last week.

Analysts at Jamaica’s largest capital market player, NCB Capital Market, say this is because market participants are positioning for seasonal tax obligations. Additionally, the Bank of Jamaica (BOJ) has indicated that it will provide US dollar liquidity to eligible B-FXITT participants via an intervention that took place recently.

The USD rose 0.33% over the JMD, selling for J$157.26 to US$1 from J$156.75 in the previous week. Increased residual demand following the oversubscription observed in the BOJ’s most recent B-FXIT intervention likely contributed to the depreciation. 

NCB Cap Market foresees more foreign exchange market interventions by the BOJ to mitigate hurricane-related inflationary effects without excessive changes to its policy rates in the near term, thereby causing strengthening of the local currency.

Money market operations

In the money market, the yield on the BOJ’s most recent 30-day Certificate of Deposit (CD) auction declined modestly. The average yield for successfully allocated bids was at 5.80%, down from 5.88% the prior week. 

The highest bid rate for full allocation was 7.499%. Total bids reached J$40.19 billion against a J$24.00 billion offer size, amounting to a bid-to-offer ratio of 1.67x, which is higher than the 1.37x from the previous week. 

Also, the BOJ recently conducted a 14-day Repurchase Operation with deposit-taking institutions in the amount of J$1.00 billion. The total value of bids received was $1.00 billion, implying a 1.0x bid-offer ratio. 

The weighted average yield was 5.79%, which is six basis points lower than the 5.85% in the previous auction.