Jul 052013

MANILA, Philippines – The country’s foreign exchange reserves dropped to a 10-month low in June after the central bank’s gold holdings plummeted in value, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said its gross international reserves (GIR) – buffer funds in times of external shocks – fell to $81.640 billion in June. It marked the third straight month of decline since GIR peaked at $85.273 billion in January.

The latest tally was also the lowest level for reserves – one of the drivers tagged by credit rating agencies for their upgrades – since August 2012 when figures were recorded at $80.728 billion.

Despite the decrease, BSP Governor Amando Tetangco Jr. said in a statement reserves remain sufficient to cover 11.8 months worth of imports of goods and services.

They are also equivalent to 8.3 times the country’s short-term foreign debt based on original maturity, and six times based on residual maturity. The BSP expects GIR to hit $87 billion this year.

“The slight decline in reserves 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…,” Tetangco said.

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According to official figures, gold holdings decreased 11.33 to $7.663 billion in June from a month ago, the lowest level in nearly two years. It was the single biggest drag to reserves last month.

 “These outflows were partially offset by inflows from foreign exchange operations of the BSP, foreign currency deposits by the Treasurer of the Philippines and income from investments abroad,” Tetangco explained.

Reserves invested abroad – which corner the bulk of the GIR – inched up to $71.048 billion in June from $70.601 billion a month ago, data showed.

Those invested with the International Monetary Fund (IMF) also rose to $540.16 million, while reserves in the form of special drawing rights – the IMF’s currency – remained at $1.257 billion.

Meanwhile, despite the peso’s weakness against the dollar last month, the BSP boosted the GIR’s foreign exchange component – a pool of funds composed of major currencies such as the US dollar and the Japanese yen.

Foreign exchange holdings rose by a fifth to $1.132 billion last month, data showed. The BSP usually increases this segment by buying dollars from the market to temper the peso’s rise.

However, in the past month, the peso, Asia’s second best performer, slumped versus the greenback to as much as the 44 to $1 level due to concerns abroad. The peso closed up three centavos at 43.40 to a dollar yesterday.

The BSP said net international reserves – GIR minus short-term liabilities – also stood at $81.6 billion in June, data showed.

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