Sabrina Gordon, Business Reporter

Research manager at May-berry Investments Limited, Rex Shettlewood. - contributed

The Jamaican currency has been appreciating consistently in value over the past weeks and while, proportionally, the gain has been marginal, foreign-exchange traders said Tuesday the trend was likely to continue in the short run.

"It would not be surprising to see it drop to $71," said one trader who spoke on condition of anonymity.

So far, the dollar has recovered 30 cents of its value, a mere half a point. It traded up Tuesday at $71.51.

Traders acknowledge that the central bank's interest-rate hike was influential in the outcome, but say the multimillion-dollar payout by Angostura Limited to Lascelles shareholders was the pivot.

"On February 11, approximately US$308 million was paid to investors ... the impact of which took effect on the local-currency market in the following two weeks," said Rex Shettlewood, research manager of Mayberry Investments Limited.

Depreciation

But Shettlewood also said the BoJ action had helped to "stave off a more aggressive depreciation" of the local currency.

"The general sentiment within the market is that the recent policy action by the central bank has served to stabilise the currency, the absence of which could have seen the currency depreciate past the J$72:US$1 level."

Since its last rate increase to within a range of 13.5 to 15 per cent, the Bank of Jamaica has not intervened in the market.

The BOJ had justified the move as a potential check on inflation. But traders say the danger remains, as the market is still liquid.

A variable-rate bond issue to open for subscription today is expected to absorb some of that cash, but brokers say uncertainty in the market, linked to the upcoming budget to be presented in a month, could influence investor behaviour.

The expectation is that the uncertainty could drive investors to lock in their US holdings, further pressuring the local currency.

But the bets are on investors unlocking their funds to take up the VR bond.

Attractively priced

The bond was said to be attractively priced at 13.25 per cent and a reset of 1.5 per cent, with one broker noting that his clients were anticipating the issue.

"Clients will pick up the offer because they have to hold some amount of GoJ instruments in their portfolio," said the trader.

Shettlewood also recommended the bond as a buy saying the new debt issue, as well as the BoJ's one-year 15 per cent CD, offer an opportunity for higher yields.

sabrina.gordon@gleanerjm.com