By Durrant Pate/ Contributor

There has been a marked increase in Jamaica dollar liquidity last week, as represented by the aggregated current balances held by deposit-taking institutions (DTIs).

As of the end of September, a total of $58.08 billon was in the market, up 15.3 per cent (or $7.69 billion) week-over-week from $50.39 billion in the prior week, resulting from paid salaries. This marks the first week of increase following four consecutive weeks of decline.

It came amidst the Bank of Jamaica’s (BOJ’s) intervention in the foreign exchange market via its B-FXITT last week, selling US$30 million, which removed Jamaican liquidity from the system. 

That marked the third-straight week that the BOJ intervened, selling a total of US$140 million with US$40 million sold on September 12; US$30 million and US$40 million sold on September 19 and 20, respectively, and an additional US$30 million sold on September 23. 

While Jamaican dollar market liquidity rose week-over-week, it is still down from $64.57 billion on September 11, before the interventions to $58.08 billion on September 27, a reduction of 11.2 per cent. 

Money market auction

Demand for money market instruments remains high, despite lower yields. The average yield from the BOJ’s 30-day competitive price auction sustained its downward trend for the ninth-consecutive week to 6.75 per cent, which is five basis points lower than in the prior week. 

The highest bid for full allocation was 6.99 per cent. The auction was oversubscribed with bids totalling $49.3 billion relative to an offer size of $35 billion, resulting in a bid-to-offer ratio of 1.41x, which is slightly higher than the 1.38x seen the previous week, partly due to the lower offer size. 

The Bank of Jamaica auctioned its latest 30-day CD yesterday, October 2. The Government of Jamaica expected to enter the market in early October based on its schedule for this fiscal year. 

FX market operations

In the foreign exchange market last week, the Jamaican dollar depreciated slightly ($0.08) with the weighted average selling rate for US$1 increasing to J$158.72. This depreciation was primarily due to a cyclical low in the supply of the’ greenback’. 

As a result, the BOJ intervened in the market on September 23, 2024, selling US$30 million at an average rate of $156.65. Although this intervention temporarily increased supply, it was still insufficient to address the supply imbalance in the market. 

In the coming months, American dollar demand is expected to accelerate as retailers start stocking up for the Christmas season, which could lead to further depreciation of the local currency.