Philippines’ forex buffer hits 3-year low in April

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) announced that the country’s foreign exchange buffer hit a new 3-year low in April 2018, dragged by strong outflows and the weaker local currency.

BSP Governor Nestor Espenilla Jr said in a statement on Monday, May 7, that gross international reserves (GIR) amounted to $80.06 billion in April, lower than the $80.51 billion posted in March.

This marks the lowest GIR since the Philippines hit $79.54 billion in December 2014. (READ: Philippine inflation rises to 4.5% in April 2018)

“At this level, the GIR nonetheless serves as an ample external liquidity buffer,” the central bank governor said in the statement.

The GIR is the sum of all foreign exchange flowing into the Philippines. Reserves serve as buffer to ensure the country would not run out of foreign exchange to pay for imported goods and services as well as maturing obligations in case of external shocks.

The central bank attributed the month-on-month decline in the GIR to outflows arising from payments made by the national government for its maturing foreign obligations as well as the foreign exchange operations of the BSP.

Espenilla also cited the revaluation adjustments on the BSP’s gold holdings, due to the decline in the price of gold in the global market.

Latest data from the BSP showed gold holdings fell by 1.5% to $8.25 billion in April, from $8.37 billion in March.

When necessary, the BSP buys or sells dollars from the foreign exchange market to prevent sharp depreciation or appreciation of the local currency.

The central bank has allowed the moderate and gradual depreciation of the peso against the greenback, in a bid to smoothen the volatility in the foreign exchange market and to support the growing economy.

The Philippine peso has recovered back to the P51:$1 level, after it hit a new 11-year low and breached P52:$1. (READ: Philippine peso weakest in over 11 years) – Rappler.com