Higher gold prices push dollar reserves to 3-month high in August

Higher global gold prices pushed the country’s dollar reserves up to a three-month high of $81.513 billion in August, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

The gross international reserves (GIR) level in August was the highest since May’s $82.177 billion although lower than the $85.792 billion recorded in the same month last year.

In a statement, BSP Deputy Governor and officer-in-charge Diwa C. Guinigundo attributed the rise in reserves mostly to “revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market, the national government’s net foreign currency deposits, and income from the BSP’s investments abroad.”

But Guinigundo said the BSP’s foreign exchange operations as well as payments made by the national government for its maturing foreign exchange obligations partially offset the buildup in dollar reserves.

In August, the peso traded at the 51:$1 level, the weakest in 11 years.

The end-August GIR can cover 8.7 months’ worth of imports of goods as well as payments of primary income and services.

Also, the dollar reserves level as of August were equivalent to 5.6 times the short-term external debt based on original maturity, as well as 3.7 times based on residual maturity.

The BSP defines short-term debt based on residual maturity as outstanding foreign debt whose original maturity was a year or less, plus principal payments on medium- and long-term loans of the government as well as the private sector that were due within the next 12 months.

As for net international reserves, or the difference between the GIR and total short-term liabilities, these also increased to $81.51 billion in August from July’s $81.06 billion.

In June, the BSP projected 2017 dollar reserves to slightly decline to $80.5 billion, equivalent to 8.3 months of import cover, from end-2016’s $80.7 billion. KGA