As the American currency weakens against the Euro, which closed Friday at $1.18, the stability of the Bahamian dollar comes into question. According to Minister of State for Finance James Smith, the Government is not currently worried about devaluation, because foreign reserves at an estimated $400 million.
He told The Guardian on the weekend there is no need for concern because the bulk of The Bahamas’ trade is with the U.S., and relative prices between the countries would not change.
On Friday, the Euro surged above $1.18, coming within a penny of its all-time high against the U.S. dollar in a rapid climb fed by signals that U.S. officials welcome a weaker currency to spur exports, the Associated Press reported.
According to U.S. Treasury Secretary John Snow, Washington won’t act to slow the U.S. currency’s fall, arguing that a weaker dollar helps U.S. exporters and therefore could help the economy grow.
Senator Smith sees an upside to this for The Bahamas, because European vacations are relatively more expensive for U.S citizens, so some of them will find it more convenient to stay in this region.
Though Europe is not a big market for The Bahamas, the Government is focusing efforts on attracting European tourists and investors.
A local financial analyst said “the U.S. policy-makers must realise the danger of allowing the dollar to continue to weaken by justifying it on the relative cheapness of U.S. exports, but must be very concerned with the impact such declines will have on corporate profits and productivity and the subsequent effects on the U.S. economy, which may result in the collapse of the dollar against other major world currencies.”
Meanwhile, Jamaica’s Central Bank is set to intervene in the foreign-exchange market to halt a more-than-15-per-cent currency devaluation in the past week.
Reports are that the Jamaican dollar made strong gains in response, rallying to an average of $62 against the U.S. dollar in open-market trading, up 4.8 per cent from $65 on Monday.
Jamaican Prime Minister P.J. Patterson said the bank would intervene as long as necessary. He denied plans to introduce exchange controls, devalue the currency or enter into a borrowing agreement with the International Monetary Fund to counter the slippage.
By Lindsay Thompson, The Nassau Guardian
