Falling oil prices slowing depreciation in foreign exchange rate – Bank of Jamaica

Bank of Jamaica Governor Brian Wynter on Wednesday disclosed that to date, depreciation in the foreign exchange rate has slowed significantly for the 2014/15 fiscal year, when compared to the last fiscal year.

Wynter, who was speaking at a media briefing at the Bank of Jamaica in Kingston, said the rate of depreciation relative to the United States dollar up to Monday, January 20, was 5.3 percent. This, he said is 2.8 percent lower than the 8.1 percent recorded for the previous fiscal year, adding that “we now expect that the rate of depreciation will slow further”.

Explaining the reason for this welcome development, Wynter shared that “the net current account deficit in Jamaica has narrowed dramatically; therefore, net demand for foreign currency from that source is much lower”.

Net current account demand relates to foreign exchange sourced to purchase goods and services externally.

The governor noted that this lowering of the exchange rate can be attributed to the decline in global oil prices, and the narrowed inflation differential between Jamaica and its main international trading partner, the United States.

Since December 2014, the US has recorded an inflation rate of 0.80 percent, down from 1.3 percent in the previous month. This represented the lowest inflation figure recorded by the US in 5 years.

“The new outlook for Jamaica’s inflation rate narrows the differential substantially. So, this is why we expect that exchange rate depreciation should now slow down even further,” Wynter added.

This figure is forecast to fall within the range of 3.0 and 5.0 percent this year.

Source: Jamaica Observer