Nov 2005 Financial News

Hike in US dollar demand

Nov 15, 2005

In the first ten months of this year, the Central Bank’s intervened in the foreign exchange market to the tune of US$545 million, an 80 per cent increase over the institution’s sales in the comparable period in 2004.

In making this observation yesterday, Central Bank Governor Ewart Williams said he did not feel a case could be made for the depreciation of the TT dollar because the exchange rate “continues to be competitive and not an impediment to the growth of exports.”

Speaking at a news conference on the November Monetary Policy Report at the Central Bank, Williams said the sale of foreign exchange by commercial banks was up by 26 per cent this year compared with last year.

He attributed the sharp increase in the demand for foreign exchange to an increase in imports, an increase in foreign portfolio investment by citizens and the expanding requirement for foreign exchange brought on by the Government’s building programme.

Williams said the Central Bank was committed to ensuring that the “spot shortages” of foreign exchange would be dealt with.

The Central Bank would do so by making scheduled, twice-monthly interventions in the foreign exchange market.

He said the Central Bank would also try to ensure that commercial banks attend to the demands for small transactions from retail customers and that the demand for foreign exchange for trade would take preference over capital market transactions.

Williams also said that the Central Bank would take all steps to tighten the liquidity of TT dollars in the financial system by ensuring “more aggressiveness” in the transmission of the institution’s interest rate signals through the system.

Describing the excess liquidity as a “main challenge,” the Central Bank Governor pointed out that loan rates have declined even though the repo rate has increased by 75 basis points this year.

The Trinidad Guardian
Tuesday, 15th November, 2005
http://www.guardian.co.tt/business1.html