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Dollar Reserves Jump To $94B In Oct.

Dollar reserves jump to $94B in Oct.

Philippine dollar reserves posted a two-month high at the end of October, ending an eight-month losing streak, helped by an increase in the national government's foreign exchange (NG) deposits with the central bank.

According to data from the Banco Central ng Pilipinas (BSP), international reserves (GIR) stood at $94.1 billion at the end of October, up 1.9% from $93 billion at the end of September.

This is 12.8% less than the $107.89 billion in reserves at the end of October 2021.

The monthly increase in the GIR mainly reflects the BSP's net foreign currency NG deposits, which include increases from the ROP (Republic of the Philippines) international bond issue and upward foreign currency bond prices. (or non-gold reserves), the central bank said in a statement.

Abundant foreign exchange reserves insulate the country from market fluctuations and ensure its ability to repay its debts during economic downturns.

At the end of October, the amount of dollar reserves is enough to cover the country's short-term external debt, approximately 6.7 times according to the initial maturity and 4 times according to the remaining maturity.

It is also equal to 7.5 months of imported goods, payment for services and basic income.

"The amount of dollars from ROP bond issuance has increased the amount of money that will be stored in line with last month's decline," said the Bank of China's chief economist. Domini S. Velasquez via Viber message.

The Marcos administration raised $2 billion (118 billion pesos) in its first dollar bond issue in October.

BTr sold $500 million of five-year notes, $750 million of 10.5-year notes and $750 million of long-term 25-year notes.

"I think some of the GIR components are benefiting from improved flows, the release of ROPs and a better reserve position," said Robert Dan J. Roses, chief economist at Security Bank Corporation.

According to BSP data, net international reserves increased by 1.1% to $94 billion at the end of October 2022 from $93 billion.

Net international reserves are the difference between settlement reserve assets ( GIR ) and reserve liabilities, including short-term foreign loans and IMF loans and borrowings.

BSP's reserve assets include foreign investment, foreign exchange, International Monetary Fund reserve position and Special Drawing Rights (SDR).

At the end of October, foreign investments in the BSP stood at $80.01 billion, an increase of 1.7% from $78.71 billion in the previous month, but a decrease of 12.2% from $91.20 billion in 2021.

At the same time, foreign exchange reserves decreased by 11.6% to 1.45 billion dollars from 1.64 billion dollars at the end of September; It was down 48 percent to $2.81 billion from last year.

International Monetary Fund reserves rose 3.2 percent to $739.1 million in October from $716 million the previous month, but were up 6.1 percent from $787.3 million the previous month.

The SDR — or the amount the Philippines can withdraw from the IMF's reserve currency basket — fell 9.2% to $3.604 billion at the end of October, from $3.97 billion in October 2021.

Last August, the Philippines received a $2.8 billion special drawing right from the International Monetary Fund to help countries recover from the coronavirus pandemic.

In October, the BSP's gold reserves fell by 0.75 percent month-on-month to $8.271 billion. It was down 9.4% from $9.13 billion a year ago.

We believe reserves may stabilize soon as the country's trade deficit narrows and remittances grow. Falling global commodity prices dampened import trade growth in September, and we expect this trend to continue.

The trade deficit narrowed to $ 4.821 billion in September from a record deficit of $6.021 billion in August.

"As external conditions remain challenging, the GIR will remain close to current levels. However, current levels and import coverage suggest that monetary authorities are well equipped to deal with currency fluctuations ."

The central bank's active participation in the foreign exchange market has helped the peso recover from a low of 59 pesos to the dollar in October. The decline in the value of the peso is due to the tightening of monetary policy by the US Federal Reserve and strong demand for the dollar.

On Monday, the local currency depreciated by 12.9% or 7.58 pesos against the dollar at 51 pesos on December 31, 2021.

"The expected tightening of the BSP will help support the Philippine peso without weakening our reserves too much, according to the Fed," Velasquez said.

The monetary board is expected to hold a second rate cut of 75 basis points this month , aiming to curb inflation and reduce the peso's devaluation . The key rate rose 225 basis points to 4.25 percent from May.

BSP expects GIR to reach $99 billion this year and $100 billion next year. - Kesha B Ta Asan

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