THE COUNTRY?S reserves of foreign currencies -- the wealth that determines the Philippines? ability to purchase imports and engage in other commercial transactions with the rest of the world -- reached another historic high of $49.6 billion in August.

The Bangko Sentral ng Pilipinas yesterday reported that the latest gross international reserves (GIR) were enough to pay for 9.2 months? worth of the country?s imports of goods and services.

The GIR, a closely watched indicator, also determines the country?s capacity to pay for foreign currency-denominated debts.

The latest amount of reserves was 5.1 times the country?s external obligations maturing within the short term, according to the Bangko Sentral ng Pilipinas.

Regular foreign exchange inflows are in the form of remittances, export revenues and foreign borrowings. In August, however, the central bank said the increase in the GIR was led by the increase in the dollars generated from foreign exchange trading.

?The increase [in the reserves] was due mainly to foreign exchange operations and income from investments abroad of the BSP, and revaluation gains on the BSP?s gold holdings on account of the increase in gold prices in the international market,? BSP Governor Amando Tetangco Jr. said in a statement.

The central bank, which has a policy of tempering the volatility of the peso, buys and sells dollars in the foreign exchange market to avoid a sharp and sudden appreciation or depreciation of the peso. Currency volatility disrupts the budget planning of businesses engaged in exports and imports, the BSP said.

So far this year, the peso has been confronted with upward pressures amid rising inflows of foreign portfolio investments.

The BSP has been buying more dollars than usual in the foreign exchange market in a bid to temper the rise of the peso. This buying of dollars has helped beef up the country?s GIR.

The BSP said the country?s rising reserves has the advantage of keeping the confidence of foreign creditors and investors in bonds and securities issued from the Philippines. The rising GIR is proof that the Philippines can meet its foreign currency-denominated obligations.

The central bank?s buying of dollars, however, dampens its financial performance as the activity entails cost.