For this week, there was no B-FXITT intervention from the Bank of Jamaica (BOJ).

This week saw lower demand for USD with the anticipation for this to continue for the remainder of the year.

For the week commencing December 19, 2022, we should see the appreciation of the local currency as the Christmas holidays are just days ahead and demand continues to ease for USD as transactions wrap up.

Week over week, USD demand was comparatively slow with the anticipation that this will continue for the remainder of the year.

The JMD appreciated against the USD resulting in a 0.38% decline in the exchange rate. This was due to the reduced volumes traded for the USD over the latter part of the week.

The bond market remained flat for the former part of this week but saw a sell-off in line with other risk-assets for the last two days.

This was in conjunction with the Fed’s 50 basis point hike in the policy rate to the 4.25% - 4.50% range and the core and headline Consumer Price Index (CPI) results of 6% and 7.1% respectively for November. This is firmly above the Federal Reserve’s target of 2%.

Week over week, the JAMAN bonds experienced little to no price change.

Bond prices were flat week over week for the JAMAN 36 bond while the other tenures saw prices sliding marginally to up to 0.63% as the largest decline.

The expectation is that volatility could remain strong going into 2023 as negative surprises continue to show up in major indicators, which suggests investors were too optimistic around inflation and interest rates for much of 2022. These themes should continue to dominate 2023, even if they moderate.

For the upcoming week, we expect the releases of the consumer confidence index, core personal consumption expenditure index and Q3 real GDP revision. We expect consumer confidence to continue to weaken as inflation takes a bite out of savings, and for this to weigh further on investor sentiment and earnings by extension.

Week over week, the JMD market showed modest liquidity given a greater demand for shorter term JMD funds while longer term funds declined.

Overnight rates inched up on the lower end to a range of 7.80% -8.25% relative to last week while 30-day rates closed the similar period between 8.50% - 8.65%.

Interest rates on longer tenures continued the downward trend ranging on both lower and upper limits, ie. from 8.65% - 8.85% when compared to the prior week. 

The BOJ 7.50% Fixed Rate 30-day Certificate of Deposit auction for the allocation of J$21B was oversubscribed, with total value received amounting to J$26B. The average yield for successful bids was 9.39%, with highest submitted bid rate of 11.5% and lowest of 7.71%. 

The USD market was relatively liquid with some tightening in the latter part of the week, on the back of unchanged rates week over week. For shorter tenures (30 -day) rates were within the range of 3.75% - 4.25% and longer tenures rates fell between 3.85% - 4.40%. 

For the week starting December 19, 2022, the expectation is that liquidity will moderate for both the JMD & USD markets.