Jun 2010 Financial News

JA dollar strengthens

Jun 02, 2010

Jamaicans can buy major currencies including the US dollar nearly seven per cent cheaper than three months prior following the influx of capital into the economy.

In a rare move, the local dollar appreciated by 4.3 per cent, 1.7 per cent and 1.26 per cent against the British pound, US dollar and Canadian dollar respectively. Over the same period, the dollar also revalued against select emerging power economies including Australian dollar, Brazil Real and Chinese Yuan by 6.7 per cent, 1.7 per cent and 1.4 per cent respectively. The British pound sold for an average $128.59 yesterday which was more than $5.78 cheaper than $134.37 on March 1; interestingly the pound was $7 dollars cheaper a day prior on Monday.

The powerful US dollar sold for an average $88.13 or $1.58 less than on March 1. In fact some cambios sold the greenback for as low as $82.50 yesterday which was 8.0 per cent cheaper than the average rate on March 1. The Canadian dollar sold for an average $84.27 yesterday, $1.08 cheaper than $85.35 on March 1.

The Jamaican dollar lost a quarter of its value against the greenback between September 2008 to February 2009 before stabilising around 89.50 in 2010. Additionally, over 12 months ending March 2010, the Jamaican dollar lost 41 per cent of its value against Australian dollar and 30.6 per cent against the Real. All movements were compiled utilising Bank of Jamaica data. The BOJ governor Brian Wynter last month stated in his quarterly press briefing that "most of appreciation" was "influenced by net private and official capital inflows and, to a lesser extent, tourism receipts".

Since February, the Jamaican economy had been infused with funds geared at increasing the stability of its currency and accounts. It secured a US$1.2 billion ($107.4 billion) stand-by arrangement with the International Monetary Fund (IMF), and an additional US$800 million ($71.6 billion) worth of multilateral loans -- US$200 million from the World Bank US$200 million and US$600 million from the Inter-American Development Bank (IDB). A measure of the increased confidence was the stability of the dollar and the 330 basis point dip in the yield curve on Government of Jamaica Global Bonds so far in 2010.

In mid February, rating agency Fitch upgraded Jamaica's long-term foreign and local currency ratings to "B-" from "CCC" and "C" respectively, with a stable outlook. Rating agency, Standard & Poors followed a week later, hiking its long-term foreign and local currency sovereign credit rating on Jamaica to "B-" from "SD" or "Selective Default" with a stable outlook. Then in March, rating agency Moody's upgraded Jamaica's local and foreign currency bond ratings to B3 from Caa1 on foreign currency and Caa2 on local currency, which it said reflected "diminished credit risks following the domestic debt exchange completed in February". Jamaica had executed a voluntary debt swap, reached as a conditionality of the IMF agreement. The debt swap registered a participation rate of more than 99 per cent and will result in Government saving some $40 billion on interest cost payments in its first year -- due to a reduction in interest rates and extension of debt maturities.

Over three months weeks ending June 1, 2010 the:

*Pound Sterling moved from $134.37 to $128.59 or 4.3 per cent;

*Canadian dollar moved from $85.35 to $84.27 or 1.26 per cent;

*US dollar moved from $89.71 to $88.13 or 1.7 per cent;

*Australian dollar moved from J$80.36 to $74.21 or 6.7 per cent;

*Brazilian Real moved from J$49.61 to $48.76 or 1.7 per cent; and

*Japanese Yen moved from J$1 to J$0.97 or 3.0 per cent.


Source:
Jamaica Observer
Wednesday June 02, 2010

http://www.jamaicaobserver.com/business/JA-dollar-strengthens_7667438