Published:Friday | May 27, 2016
A bond offer from a top American bank, Goldman Sachs, has proven disruptive to Jamaica’s foreign exchange market in recent weeks, forcing the Bank of Jamaica to call on its reserves in order to stop the local currency from falling too far and too fast.
On Thursday, BOJ Governor Brian Wynter proclaimed that a 0.9 per cent depreciation in the rate of exchange between the Jamaican and United States dollar in April and a 1.8 per cent decline so far in May was excessive and not supported by prevailing economic conditions.
It’s a view that confirms the concerns expressed by some in the business community that the currency has been decelerating at too rapid a pace.
Wynter said the pressure on the foreign exchange rate since April appeared to have been influenced by specific financial account transactions and their impact on market pricing.
The most significant of those “appears to have been the prospect of a large US dollar bond issue in the local capital market by a foreign financial institution,” Wynter told his quarterly press briefing at the BOJ’s offices in downtown Kingston on Thursday.
“This stimulated additional demand for foreign exchange and influenced expectations of further depreciation.”
Wynter declined to name the foreign financial institution, but talk has been circulating for a while about expected dealings by Goldman Sachs.
The term sheet for a Goldman Sachs bond to be issued in Jamaica was released on April 20. It’s understood that some in the investment community have quietly been railing against the offer as essentially a bet against the Jamaican dollar, even as Jamaican investors line up to subscribe.
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