High demand for US dollar driving up exchange rate
By Nicosia Smith
Stabroek News
December 8, 2006
The high demand for the US dollar and its non-cash instruments are driving up the exchange rate, which is pegged against the dollar.
Over a week, city cambios have sold the US dollar for as high as $206, now it is $205, and the US denominated non-cash instruments at Commercial Banks have reached as high as $208, now $203-$205.
On Wednesday at Republic Bank (Guyana) Ltd the US notes were being sold at $205 while drafts were being offered at $206; at Citizen Bank the selling rate was $203, a drop from last week when it was $205 and drafts $204, also a decrease from last week. At the Guyana Bank for Trade and Industry (GBTI) the US notes were being sold for $205 along with the drafts, but depending on the amount the rates were lower.
At Swiss House Cambio on Water Street the selling rate for the US note was $205 and at Laparkan its last selling rate against the dollar was $204 but no notes were available for sale on Wednesday. The selling rate of the US dollar had bordered on $201-$202 before September.
Managing Director Michael Archibald of Republic Bank in a recent interview explained that the demand for the US notes is still very high and he felt that the demand will continue leading up to the Cricket World Cup (CWC) in 2007.
Archibald made this analysis after noting that large scale construction of hotels, housing and home repairs for the CWC will all demand foreign exchange for inputs like steel, cement and finishing materials. He noted that there is the normal foreign exchange demand to meet from the merchants shopping for the Christmas season and from vacationers.
Apart from the demand driven by the building sector, the construction of the Berbice Bridge will demand millions of US dollar and this would have to be bought from the local currency market.
Chief Executive Officer Radhakrishna Sharma of GBTI on November 30 told Stabroek News that demand and supply is the main factor behind the rising US dollar currency. It is his view that once the demand tapers then the dollar will stabilize. Sharma believes that demand is being driven by merchants buying for the season but did not give other reasons that may have impacted the rates. He too felt that demand is likely to be strong leading up to the CWC.
Hard currency from exports, tourists and traders play important roles in stabilizing the foreign exchange rate.
In an interview mid-November, Central Bank Governor Lawrence Williams had indicated that once the monies from exports such as rice and sugar are on hand the rates should begin to stabilize. Nevertheless, he did note that the rates will continue to fluctuate into next year and possibly leading up to the CWC 2007 in March.
According to rice production and export figures from the Guyana Rice Development Board (GRDB), the total rice production this year is some 306,828 tonnes compared to 273,237 last year. While exports have also increased to 205,000 tonnes compared to 182,000 tonnes last year, export earnings of US$52M were realized compared to US$46M last year.