Bank of Jamaica (BOJ) Governor, Brian Wynter, says that, for the calendar year 2010, the value of the Jamaican dollar appreciated by 4.4 per cent against the US dollar, in contrast to the 10.2 per cent depreciation in 2009.
Speaking at the BOJ’s quarterly press briefing on Tuesday (February 15) in downtown Kingston, Mr. Wynter noted that the appreciation was associated with increased net private capital inflows, which were more than sufficient to offset the impact of increased demand for current account transactions.
“In the context of this excess supply of foreign currency in the market, the Bank of Jamaica made net purchases of US$51 million during the quarter,” he said.
The Governor stated that these purchases, along with the purchase from the Government of the proceeds of a US$200 million loan from the Inter-American Development Bank (IDB), contributed to an increase of US$197.7 million in the Net International Reserves (NIR) during the quarter.
“At the end of December 2010, the NIR amounted to US$2,171.4 million, which was US$351.4 million above the revised target under the International Monetary Fund standby arrangement,” Mr. Wynter stated.
He noted that gross reserves amounted to US$2,982.8 million, representing 23 weeks of projected goods and services imports and comparing favourably with the international benchmark of 12 weeks.
He said also reflective of the increasing confidence about the near-term prospects for the economy, the foreign exchange market was relatively stable for the December quarter. In this context, there was a marginal appreciation of 0.45 per cent in the weighted average selling rate of the dollar for the review period. This was in comparison to average depreciation of three per cent for the last five December quarters, he noted.
The BOJ Governor also noted that interest rates continue to trend down. He said on November 15, the Central Bank reduced the interest rate on its 30-day open market instrument by half of one per cent to 7.5 per cent. On February 1, this year, this rate was further reduced by a quarter of one per cent.
“These rate reductions were done in the context of continued weakness in the domestic economy, and the favourable prospects for inflation. In addition, investors have continued to show a preference for Jamaican dollar instruments, signifying their confidence in the positive near-term prospects for continuing stability in the economy,” the Governor added.
He noted that market-determined interest rates continued to decline in the quarter. This took the Treasury Bills down to 7.48 per cent, 7.40 per cent and 7.48 per cent, respectively, in December.
The Governor said the external community has also continued to demonstrate its confidence in Jamaica’s creditworthiness, noting that average yields on Jamaican sovereign bonds have fallen from about 10.5 per cent at the end of January last year to 7.57 per cent at the end of January this year.
CONTACT: ATHALIAH REYNOLDS