Bank of Jamaica sold US$30 million through a flash foreign-exchange auction on October 2 after eligible bids reached US$85.55 million, providing fresh evidence of strong demand for US dollars from banks and cambios.
The central bank said it received 49 eligible bids in the B-FXITT Flash Intervention Tool sale operation. Eighteen bids were allocated, with the full US$30 million offer taken up at a settlement price of J$158.14 per US dollar.
The operation was opened between 8:45am and 9:45am on Friday, with settlement scheduled for Monday, October 5.
Who received the dollars?
Successful allocations went to several Jamaican financial institutions, including JN Bank, Sagicor Bank Jamaica, CIBC Caribbean Bank Jamaica, National Commercial Bank, First Global Bank, JMMB Bank and Cornerstone Trust & Merchant Bank.
Cambios receiving allocations included GraceKennedy Currency Trading Services, Alliance Financial Services, Barita Investments and Proven Wealth.
GraceKennedy Currency Trading Services received the largest single allocation at US$6 million, while JN Bank received US$4.6 million.
What the auction tells us
The fact that eligible bids totalled almost three times the amount offered points to strong demand for foreign currency among authorised market participants.
However, the auction result by itself does not establish that Jamaica is facing a currency crisis, nor does it predict where the Jamaican dollar will trade next.
For Jamaican businesses, access to US dollars is important because importers, fuel distributors, retailers, manufacturers and other companies frequently need foreign currency to settle overseas invoices and purchase goods.
The Bank of Jamaica uses B-FXITT operations as one of its tools for supplying foreign currency to the market when conditions warrant intervention.
The central bank has already indicated that standard foreign-exchange sale operations are scheduled for October 15 and 16, with amounts to be announced closer to those dates.
The next figures to watch will be the scale of demand at those auctions, the Jamaican dollar exchange rate and whether corporate demand for foreign currency remains elevated.
Read more from DGBN’s Finance desk, Jamaica desk and Caribbean desk.