Forex gains, rising gold prices push GIR higher

The country’s foreign currency reserves rose by almost a billion dollars in April due mainly to currency market gains made by the central bank, deposits made by the national government and rising gold prices, the Bangko Sentral ng Pilipinas said Friday.

Documents from the BSP showed that its gross international reserves (GIR) rose to $81.82 billion as of end-April 2017. This level was higher by $0.93 billion than the end-March 2017 GIR of $80.89 billion.

Income from the BSP’s overseas investments also contributed to the higher reserve level, BSP Governor Amando Tetangco Jr. said.

These were partially offset by payments made by the government for its maturing foreign exchange obligations.

The end-April 2017 dollar reserve level can cover nine months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 5.4 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.

Analysts watch dollar reserves closely since it is a strong indicator of an economy’s ability to fend off currency speculators during financial turmoil as well as to keep mitigate any volatility in the peso-dollar exchange rate during periods of capital flight.

Net international reserves —which refer to the difference between the BSP’s GIR and total short-term liabilities —increased by $0.92 billion to $81.8 billion as of end-April 2017 compared to the end-March 2017 NIR of $80.88 billion.

Last week, Tetangco warned that the currencies of emerging market economies like the Philippines might be subjected to depreciation pressure over the near term following what is expected to be a period of strength for the US dollar as growth picks up in the world’s largest economy.

The country’s dollar reserves fell to a three-month low of $80.87 billion in March partly due to a weaker peso. The GIR level that month was lower than February’s $81.44 billion and January’s $81.38 billion, although higher than end-2016’s $80.69 billion.

Tetangco had attributed the month-on-month drop in March to “outflows arising from the BSP’s foreign exchange operations and the payments made by the national government for its maturing foreign exchange obligations.”

The peso was at the 50:$1 level last March, a more than 10-year low.