The Central Bank is defending its intervention in the foreign exchange market, saying it has “kept its word and has been steadily implementing a series of new and improved mechanisms to enhance the distribution of US currency in the local foreign exchange market”.
Sources within the bank told the Express yesterday that, as it had said in February, the bank was taking aggressive steps to deal with the unusual degree of tightness that was being experienced in the market at the time.
“We believe these steps have been successful. First of all we conducted a special sale of US$50 million on Wednesday, March 5, 2014 to meet immediate trade related demand of small and medium business enterprises. Manufacturing companies benefited from this special intervention, as 51 firms received a total of US$8.5 million in funds, the second highest volume of US currency sold through this arrangement,” sources told the Express.
As of April 1, the bank also instituted new distribution mechanisms for foreign exchange sales to authorised dealers.
The Central Bank typically supplies 25 per cent of the total foreign exchange needs of the market through its sales of foreign currency to authorised dealers.
“We believe any residual tightness being experienced in the system might be isolated to the specific circumstances of one or two authorised dealers who cannot fully satisfy the immediate foreign exchange needs of their clients,” sources said.
As of April 28, the supply of foreign exchange in the domestic market outstripped demand by over US$38 million. For the year to date, the local foreign exchange market is very liquid, with an excess supply of over US$225 million mainly due to the Central Bank’s interventions.
Further to this, authorised dealers currently have enough capacity to facilitate additional foreign exchange demand of up to US$289 million, if required, bank sources said.
“We have received positive feedback and support from several businesses as well as from some authorised dealers who expressed their satisfaction that we have brought greater equity into the distribution of foreign exchange in the domestic market,” bank sources told the Express.
On Monday, the Trinidad and Tobago Manufacturers’ Association issued a statement complaining about the difficulty its members were facing trying to access foreign exchange to pay for goods.