He said this was the reason why the BPNG introduced the trading margin in 2014 that moved in accordance with market fundamentals.
However, Mr Bakani said the exchange rate movements reflect market fundamentals, with the supply of and demand for foreign currency.
“The kina has continued to depreciate over the past three years but at a slower pace as import demand outweighed export receipts due to the low international commodity prices,” Mr Bakani said.
He said the foreign exchange market was not functioning efficiently as expected, hence, the Bank introduced the trading margin in 2014 that moves in accordance with market fundamentals.
“This was followed by a set of directives issued in 2016 and early 2017 to further assist and strengthen the market.”
“In 2017, some improvement in foreign exchange inflows due to an increase in prices of some export commodities resulted in the relative stability to the Kina exchange rate movement in 2017 despite high import orders in the market.”
“In 2017, the kina exchange rate depreciated against the US dollar from 0.3150 as at the 31st December 2016 to 0.3095 in December 31, 2017. It has further depreciated by 10 basis points to 0.3085 in February 2018, He sai