Kato: Share G-7 view that excessive FX moves are undesirable

Kato: Share G-7 view that excessive FX moves are undesirable

The Group of Seven (G-7) nations have collectively expressed their concerns over recent excessive movements in foreign exchange (FX) rates, highlighting the potential economic risks and instability they pose. In a joint statement, the G-7 emphasized the need for stable FX markets to facilitate global trade and investment.

Meanwhile, the Bank of Jamaica (BOJ) has reaffirmed its commitment to maintaining stability in the foreign exchange market. In a recent press conference, BOJ Governor Richard Byles assured that the bank has sufficient foreign currency reserves to meet demand and stabilize the exchange rate [1][2]. As of August 12, Jamaica’s gross international reserves stood at a historically high level of US$6.2 billion, or 148 per cent of the measure considered adequate [1][2].

Byles noted that while the foreign exchange market has experienced slight volatility, this was largely due to temporary factors such as uncertainties about global economic developments and changes in interest rates. He emphasized that the BOJ is committed to a flexible exchange rate regime, which allows the exchange rate to fluctuate based on long-term inflation trends [1][2].

The BOJ's Monetary Policy Committee (MPC) recently decided to maintain the policy rate at 5.75 per cent per annum and continue to pursue measures to preserve stability in the foreign exchange market [1][2]. Byles also highlighted that the bank's participation in the foreign exchange market has remained broadly unchanged, with the BOJ selling US$1.2 billion via its Bank of Jamaica Foreign Exchange Intervention Trading Tool (B-FXITT) facility over the 12 months to end-July 2025 [1][2].

The current account of Jamaica’s balance of payments remains in surplus, reflecting continued growth in remittance inflows and tourism arrivals despite policy changes in the external environment. This stability, combined with strong economic fundamentals and the BOJ's intervention, has led to normalized expectations and a reduction in the pace of depreciation since the end of June [1][2].

The G-7’s stance on FX stability underscores the importance of maintaining a balanced and predictable economic environment. As the global economy continues to navigate uncertain times, the BOJ’s actions and the G-7’s position serve as a reminder of the importance of stability in financial markets.

References:
[1] https://jamaica-gleaner.com/article/news/20250822/boj-has-enough-reserves-maintain-stability-foreign-exchange-market-byles
[2] https://jis.gov.jm/boj-has-enough-reserves-to-maintain-stability-in-foreign-exchange-market-governor/