Dollar reserves rise to $79.35 billion in July

MANILA, Philippines - The country’s gross international reserves (GIR) hit a new all-time high of $79.35 billion last month as the Bangko Sentral ng Pilipinas (BSP) bought more dollars to tame the peso’s appreciation, official data showed.

The dollar reserves went up 4.22 percent from June’s $76.129 billion and also surpassed the BSP’s 2012 forecast of $77.5 to $78 billion which Governor Amando Tetangco Jr. had said is likely to be revised soon.

Data showed the increase came mainly from a three-fold hike in BSP’s foreign exchange holdings to $968.49 million last month from $322.89 million in June. An analyst said this reflected the central bank’s intervention in the foreign exchange market to manage the peso’s climb.

“If monetary authorities did not intervene (in the foreign exchange market), we might have seen the peso to have risen to the 40-level against the dollar, which is a very abrupt adjustment,” Bank of the Philippine Islands economist Jun Neri said in a phone interview.

“Basically, the general rule of the BSP is that they want to make sure sharp adjustments do not happen,” he added.

The local currency has risen 5.1 percent from January to July this year, making it one of the best performing currencies in the region. While a strong currency makes imports more affordable, it also causes export products to be expensive abroad, resulting in lesser export earnings. It also trims the value of remittances from overseas Filipinos.

Meanwhile, the BSP also recorded increased income from its investments abroad, foreign currency deposits by the government, as well as upward adjustments in the value of its gold holdings as gold prices rose in the world market.

These were partially offset by payments to government’s maturing debts and banks’ foreign currency withdrawals, Tetangco said in a statement.

“The end-July 2012 GIR level could adequately cover 11.7 months worth of imports of goods and services income. It is also equivalent to 10.7 times the country’s short-term external debt based on original maturity and 6.4 times based on residual maturity,” he explained.

Net international reserves —GIR minus the BSP’s short-term liabilities — likewise rose to $79.3 billion.