Published: Friday November 7, 2008
Five per cent decline in value of the Jamaican dollar over the past month was triggered by demands from US brokers that their Kingston counterparts pay up for government bonds bought on their behalf, analysts here say.
"Thirty to 50 per cent for overall emerging market brokers who offered margin on securities overseas made calls, basically sending up demand for US dollar currency to cover positions," said Mark Croskery head of the Kingston brokerage, Stocks and Securities Ltd.
Although it floats freely, the Jamaican dollar benchmarks primarily against the US greenback, and in recent years has slipped annually in a range of between three and five per cent.
But in the past month, as the credit crisis in America caused institutions there go sour on emerging market assets - including normally well-prized Jamaican government bonds - the Jamaican dollar has been in something of a free fall.
At October 8, it hovered at J$72.87 for US$1, but the next day passed the psychologically important J$73 to US$1.
By Wednesday of this week, it had tumbled to J$76.54 to US$1, a full five per cent drop since the end of the first week of October. On Thursday, the JMD fell even further to $76.72.
Precipitous decline
The precipitous decline of the Jamaican currency came despite the island's central bank having dipped into its reserves to sell US dollars directly to local brokers to cover their foreign obligations.
It also, during the second week of October - when the Jamaican dollar was trading at around J$74 to US$1 - announced its willingness to lend financial institutions up to US$300 million for the same cause.
Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081107/business/business7.html
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