PH dollar reserves hit historic high

Foreign currency inflows pushed the country’s dollar reserves higher in August—once more, their highest level in the Philippines’ history—which bodes well for the strength of the peso and industries that buy raw and intermediate materials from abroad.

Preliminary data showed the country’s gross international reserves rose by $430 million to $85.61 billion as of end-August 2019 from $85.18 billion at the end of the previous month, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said on Friday.

“The month-on-month increase in the [dollar reserve] level reflects the national government’s net foreign currency deposits and BSP’s income from its investments abroad,” he said in a statement.

“However, the increase in reserves was partially tempered by payments made by the national government for servicing its foreign exchange obligations,” the central bank chief added.

The end-August 2019 level of dollars held by the BSP serves as an external liquidity buffer and was equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

It was also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

Net international reserves—which refers to the difference between the BSP’s total dollar holdings and total short-term liabilities—likewise increased by $430 million to $85.6 billion as of end-August 2019 from the end-July 2019 level of $85.17 billion.

At its lowest level in October last year, the country’s dollar reserves dipped to $74.7 billion, reversing only after the BSP completed its aggressive string of anti-inflation interest rate increases, thus making peso-denominated assets attractive once more for investors and fund managers.