The country’s foreign exchange reserves are expected to retrace an uptrend this month with the central bank buying dollars from the open market to keep the peso from appreciating too sharply.
Bangko Sentral ng Pilipinas (BSP) earlier declared an $87-billion target for foreign reserves this year.
According to BSP Governor Amando M. Tetangco Jr., the country’s buffer for the gross international reserves (GIR) likely expanded this month, providing further support for the Philippine economy.
The country’s GIR at the end of June stood at $81.6 billion, which is $1.3 lower than in May. Fortunately, the country’s reserves are still enough to cover nearly a year’s worth of import needs notwithstanding being lower from the start of the year.
Tetangco said that Bangko Sentral’s dollar inflows from foreign exchange operations make up 60% of the country’s GIR. Maintaining the dollar’s value up also benefits the GIR value, which is denominated in dollar, although other currencies and even gold are also included in the reserves.
In the event of a deficit in foreign money, the government has the option to dip into the BSP’s reserves to pay for the importation of goods.
Concurrently, Tetangco said the BSP was actively working on diversifying the types of currencies included in the GIR. One possibility is the inclusion of the Chinese Yuan, one of the most liquid currencies in the world today and one of the country’s major trading partners.
On the other hand, BSP said that in order to be part of reserves, a currency must be easily convertible and its values should be driven by market forces. The Yuan is currently pegged to the US dollar and that means it cannot be included in the country’s reserves.
