July reserves hit $106.6B

Philippine dollar reserves rose in July after the government’s global bond sale and due to rising gold prices in the international market, the central bank said on Friday.

Gross international reserves went up by 0.75% to $106.55 billion from a month earlier, data from the Bangko Sentral ng Pilipinas (BSP) showed. The end-July level was 8.1% higher than a year earlier.

The central bank traced the increase to inflows from net foreign currency deposits by the government, including proceeds from its global bond sale and the rise in the value of gold held by the BSP.

The state raised $3 billion from its dual-tranche offering of dollar-denominated bonds in June, — $2.25 billion via 25-year securities and $750 million in 10.5-year notes. The global bonds were settled on July 6.

The state tapped the global bond market for the third time this year to support its P4.5-trillion spending plan for the year amid a coronavirus pandemic.

Meanwhile, BSP data showed the gold reserves stood at $9.15 billion as of end-July, 3.1% higher than a month earlier 27.4% lower than last year.

Spot gold went up by 0.2% to $1,756.61 per ounce on Friday, with analysts expecting prices to stay within $1,750-$1,800 in the short term, Reuters reported.

The Philippine central bank started actively trading in gold to take advantage of rising prices amid a global health crisis.

Higher reserves were offset by outflows from the government’s payment of foreign currency-denominated loans and by foreign exchange operations of the central bank.

The reserve level was adequate to provide a liquidity buffer equivalent to 12.1 months’ worth of imports of goods and payments of services and primary income, the central bank said.

It can also cover the country’s short-term external debt up to 7.7 times based on original maturity, or 5.1 times based on residual maturity.

The country’s dollar reserves were three times greater than the international threshold covering three to four months’ worth of imports, which could cushion the peso against the dollar’s rise, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said in a Viber message.

The higher reserves could boost the peso amid a strong outlook for the dollar, said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. — Beatrice M. Laforga

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