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JM | Dec 5, 2020

No FX swap transactions confirmed in Jamaica this week

/ Our Today

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The Bank of Jamaica. (Photo: VisitJamaica.com)

The Bank of Jamaica (BOJ) is reporting that there was no confirmed swap transactions this week.

Additionally, no swaps matured via this arrangement this week. As such the total outstanding under the BOJ FX Swap Arrangement is US$6 million. For the week ended November 27, 2020, there was no foreign exchange (FX) swap transaction confirmed.

On January, 22 2020, the BOJ issued a notice regarding the introduction of a new instrument available to foreign exchange authorised dealers of the Foreign Exchange Swap Arrangement. This instrument is intended to enhance the BOJ’s management of the foreign exchange market and provides US dollar liquidity to the market through authorised dealers via a swap arrangement.

Under the FX Swap Arrangement, the BOJ agrees to sell US dollars to authorised dealers within a pre-determined limit, at the prevailing market rate, with an agreement to buy back the same amount of US dollars at a time in the future at an agreed forward rate.

In addition to its usual B-FXITT operations, the BOJ utilises the FX swap arrangement to smooth out excess volatility and restore orderly conditions in the market. The BOJ reported that the FX swap arrangement is intended to enhance the bank’s management of the foreign exchange market and provides US dollar liquidity through authorised dealers via a swap arrangement.

The fact that there has been no FX swap confirmed is an indication of sufficient hard currency in the market to satisfy local demand, which has been a point repeatedly stated by the BOJ.

The Central Bank reported that current FX market volumes are very healthy and there is no shortage of FX in the system. The BOJ argued that the FX market should demonstrate cautious and responsible behaviour noting that the robust level of remittance inflows added to the vigorous volumes present in the market, and the strength of the BOJ’s foreign reserves, all combine to indicate clearly that the economy at this time has more than enough FX at its disposal. The BOJ contends that there is sufficient FX in the market to safely navigate Jamaica rough waters of the current COVID-19 crisis.

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