The recent tightness in the domestic foreign exchange market will soon be at an end, possibly before the end of the week, Central Bank governor Jwala Rambarran said yesterday.
“With the sizable intervention we have made we have cleared all of the accumulated demand and put more in to clear the demand going forward. We have put enough into the system to clear out all of the demand for the period ahead. June is usually a very liquid month for foreign exchange. And we’ve changed how we sell in that we will be making more timely interventions than before-even before tightness in the market, we will be coming in,” he said at the Bank’s Monetary Policy Forum at the Magdalena Grand Hotel in Lowlands, Tobago.
The quantity of foreign exchange in the commercial banking system (from customer deposits) is about US$4 billion. The overall demand is about US$6 billion-a difference of US$2 billion that is usually picked up by the Central Bank.
For the first five months of 2014, the Bank has injected US$610 million into the financial system.
Rambarran hit back at critics who had blamed the apparent shortage in the financial system on the Bank’s new auction system to authorised dealers.
“There have been many opinions circulating on this topic and I will say in most cases these opinions have been uninformed,” he said.
He noted that last week, the “sensitive issue” entered the political domain via comments made by “those who displayed little knowledge and understanding about the Central Bank’s role in the domestic foreign exchange market”.
He assured the country that the dollar was not in danger of being devalued, and that the country had sufficient foreign exchange to meet demand. Foreign exchange reserves, he said, amounted to US$10.5 billion, or more than a year of import cover.
He explained the Bank’s new system, introduced in April, and which replaced the previous 21-year-old system instituted after the liberalisation of the market in April 1993.