“It’s because of the foreign exchange operations,” Tetangco said, adding that the appreciation of the US dollar against other currencies such as the Japanese yen and euro also supported the rise in the Philippines' gross international reserves (GIR). The country's hoard of US dollars accounts for 60 percent of its foreign exchange reserves.
“It could to the extent that you have non-dollar reserves – such as yen and euro. If the value of US dollar went up against these currencies, it would have an effect in the dollar value of the GIR but it would be small,” Tetangco said.
He said the BSP would continue to look for opportunities to diversify its reserves, adding that the Chinese yuan can become a candidate if it becomes a convertible currency.
“There are certain criteria for a currency to be part of reserve. This is based on the International Monetary Fund (IMF) definition of international reserve, which is that the currency should be convertible,” Tetangco said.
The Philippines' GIR stood at $81.6 billion at end-June, or $0.4 billion lower than the $82 billion at end-May. At this level, reserves remain adequate to cover 11.8 months worth of imports of goods and payments of services and income.
Alternatively, the reserves would allow the country to pay 8.3 times over its short-term external debt based on original maturity and six times based on residual maturity, which includes portions of the principal maturing in the next 12 months.
The slight decline in reserves last June was due mainly to revaluation adjustments on the BSP’s gold holdings arising from the decrease in the price of gold in the international market. Also pulling down GIR were payments for maturing foreign exchange obligations of the national government.
The BSP forecast reserves hitting $86 billion by yearend, up from last year's $83.8 billion. An ample GIR helps prop up the peso and keep domestic inflation at bay.
The country's economic managers last week revised their exchange rate forecast to a range of P41-43 for every dollar, lower than their previous estimate of P43-45. The peso yesterday settled at 43.23 against the greenback.
Inflation has averaged 2.9 percent in the first six months of the year, or below the lower end of the BSP's full-year target range of 3-5 percent.
source: interaksyon.com