The Bank of Jamaica (BOJ) to assay update of FX system
Commencing July 26, 2017, authorized dealers and eligible cambios will purchase foreign exchange from the Bank of Jamaica (BOJ) via a competitive bidding process. The new framework is being introduced by way of a pilot exercise on June 28, 2017. This framework, referred to as the BOJ Foreign Exchange Intervention & Trading Tool (B-FXITT) will see the BOJ pre-announcing, up to four weeks in advance, the magnitude of FX that it proposes to sell to the market on Wednesday of each week. While all authorised dealers and eligible cambios will be invited to submit bids to purchase foreign exchange from Bank of Jamaica at exchange rates that they specify. However, if deemed necessary the BOJ may also sell foreign exchange to authorised dealers and eligible cambios outside of this weekly schedule.
In its press release, the BOJ indicated that “the implementation of this upgrade to the Bank’s operations forms a part of Bank of Jamaica’s ongoing effort to enhance the effectiveness of its monetary policy transmission and foreign exchange operations.” Additionally, the BOJ stated they “will publish a report from each operation on the same day, including the weighted average exchange rate arising from the operation, and will also introduce the publication of midday weighted average exchange rates.”
The Bank further outlined that the introduction of B-FXITT is not expected to disrupt the manner or liberty with which members of the public currently purchase or sell foreign exchange from or to their banks and cambios.
This announcement came on the heels on the BOJ announcing a change to their policy rate. Effective July 1, 2017, the BOJ’s policy rate will be the interest it pays on overnight deposits held by deposit-taking institutions (DTI) at the BOJ. The policy rate is used by the BOJ to signal its monetary policy stance. Currently the overnight rate stands at 3.75% per annum. As such, the interest rates payable on the 30-day certificate of deposits will no longer be designated the policy rate. Additionally, effective July 28, 2017, the 30‐day certificates of deposit to primary dealers and DTIs will be offered in fixed volumes by competitive multiple‐price auctions.
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