Money market remains tight and fiercely competitive

Durrant Pate/Contributor

The Jamaican dollar continues to claw back some of its lost value during 2022, with a marginal appreciation last week.

The local currency appreciated by a mere 0.02 per cent relative to the American currency week over week with the “greenback” selling rate inching down to J$154.57 on November 11, 2022 from J$154.60 on November 4, 2022. However, during trading yesterday, the dollar slipped back, weakening to J$154.66.

While market demand remains strong, the slight appreciation last week was due to price resistance as US dollar sellers are currently selling at a level higher than the point at which the market is willing to purchase the greenback. The US dollar money market remains stable and moderately liquid.

Broker demand for the American dollar remains at 30-days and longer-tenured funds.

J$ money market performance

Liquidity in the Jamaican dollar money market remains tight and continues to cause heightened levels of competition for cash by market players. Consequently, rates are expected to remain elevated.

Market players were mainly square last week with very limited overnight lending. Money market rates also inched higher for longer tenors, likely impacted by the average yield from the Bank of Jamaica’s (BOJ’s) competitive price auction. The average yield from the competitive auction of BOJ Certificates of Deposits rose to 8.80 per cent from 8.15 per cent in the prior week.

The auction was oversubscribed, with bids totaling J$19.98 billion relative to offer size of J$18 billion. The highest bid rate for full allocation was 10.199 per cent.

As at November 10, 2022, a total of J$11.2 billion was in the market, as represented by the BOJ’s aggregated current balances with a few deposit taking institutions accounting for the majority of this liquidity. This marks a J$2.67-billion decline from the J$13.88 billion held on November 4.