Emerging Markets Rates and Currencies Handbook

Bahamas (BSD - Bahamian Dollar) Citi in Bahamas Citi® established operations in The Bahamas in 1960 and for over 60 years has provided Corporate and Investment Banking services in the country. Citi was the first bank to take the Government of The Bahamas to the international capital markets. Market Overview The local FX market is regulated by the Central Bank (CB) of The Bahamas who applies Exchange Controls rules to ensure the disciplined use of the country's foreign currency reserves and to assist in its Balance of Payments. CB approval is required purchase hard currency and sell BSD. Tourism provides most of the foreign exchange needed to fund the import requirements of the economy as the absence of a strong agricultural and industrial base results in a high reliance on imports for consumption and capital development. CB has been maintaining a fixed rate parity of the Bahamian Dollar with the United States Dollar in 1:1 to the USD since 1970. The Benchmark/Board trading rates are set to 0.9950 for clients to sell USD and 1.0125 for clients to buy USD. The spot market is driven entirely by trade flows averaging $24.4mm on a daily basis. A forward market also exists but flows are more episodic and not captured in the Central Bank data. Hard currency demand varies throughout the year and demand increases in the last few months of the year. This is typically the result of a ramp up in imports to prepare inventories for the holiday season. However, liquidity is ample and the Central Bank has been acting as the seller of last resort if there is a shortage of liquidity in the market. Rates activity is limited. There is no observable daily trading activity. Trading is limited to Central Bank periodic auctions. Convertibility The Bahamian Dollar (BSD) is not fully convertible. 183