FX reserves grow for fourth month

FOREIGN CURRENCY reserves rose in February for the fourth straight month, the central bank reported on Thursday, marked by higher investment income at a time of a stronger peso.
Gross international reserves (GIR) surged to $82.896 billion for the month, rising from January’s upward-revised $82.487 billion and the $80.432-billion level in February 2018, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
This is the highest reserve level since October 2016, when the GIR stood at $85.106 billion.
In a statement, the central bank attributed the bigger GIR to inflows from its foreign exchange operations, as well as higher net foreign currency deposits held by the government. This was partly offset by the state’s payment of its maturing foreign obligations.
Income from the BSP’s offshore investments rose to $70.44 billion last month from the $69.97 billion in January as well as the $64.185 billion seen a year ago. This accounted for bulk of the reserves.
In contrast, the country’s foreign currency holdings slipped to $2.431 billion from January’s $2.441 billion, just as the peso gained strength versus the dollar.
The central bank usually dips into the reserves to temper sharp swings in the exchange rate. The local unit continued to pare back 2018’s losses to average P52.1901 against the greenback, coming from January’s P52.4679. In fact, the peso even returned to the P51:$1 level in the last two days of February.
Some currency traders have said that the BSP likely bought more pesos during the month as monetary authorities sought to rebuild the reserves — after it slipped to a seven-year low in 2018 — to cushion the peso’s drop.
Meanwhile, the value of the BSP’s gold holdings slid to $8.359 billion from $8.407 billion a month ago. This reflects lower gold valuations in the international market.
Reserves maintained under the International Monetary Fund (IMF) dipped to $472.5 million versus $477.2 million the prior month.
The country’s special drawing rights — or the amount which can be tapped under the IMF’s reserve currency basket — roughly steadied at $1.193 billion.
February’s GIR shot past the $77-billion projection of the central bank for the full year.
The reserves can cover up to 7.3 months’ worth of import duties, higher than the seven-month ratio in December but below the 7.5-month coverage a year ago. Still, the central bank described this as an “ample” liquidity buffer above the three-month global standard.
The GIR is also equivalent to 6.3 times the Philippines’ short-term foreign debt based on original maturity (of up to one year), and 4.1 times when computed in residual terms (outstanding external debt with original maturity of up to a year, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months).
The GIR has consistently been cited as a source of strength for the Philippines, as it serves as a buffer against external shocks that could erode the country’s capability to service its foreign obligations. — Melissa Luz T. Lopez