July GIR eases 0.25% to $80.4B

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Surprises markets with milder-than-expected fall

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THE Philippines’ gross international reserves (GIR) slipped to $80.4 billion in July from $80.6 billion in June and a year earlier, the central bank said on Friday.

Year-on-year and month-on-month comparisons showed a 0.25 percent or a $200 million drop in the level of international reserves in July.

The decline surprised the markets on the positive side as it turned out milder than expected, with the new level maintaining imports cover for 10.6 months.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the drop in reserves was due mainly to payments made by the national government for its maturing foreign exchange obligations and revaluation adjustments on the central bank’s gold holdings and foreign currency-denominated reserves.

The fall was partially offset by the BSP’s foreign exchange operations and income from investments abroad, as well as the national governments net foreign currency deposits.

Market surprise
The slight decline came as a pleasant surprise to market players, an analyst said.

“The $80.4 billion was actually a surprise to the markets in a good way as most analyst had felt that GIR would drop more severely as the BSP was widely suspected to have intervened in the foreign exchange markets to limit the volatility in the spot market,” said Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands.

However, by end-July the peso rate had weakened to P45.26 to the US dollar from P44.93 at end-June.

Mapa said the drop in the dollar reserves has relieved some market anxiety for the time being.

“The size of the reserve remains very healthy to shield the Philippines from the possible and imminent financial market volatility that will ensue as soon as the Fed decides to hike interest rates,” he added.

The BSP said the latest GIR level provides a buffer equivalent to 10.6 months of merchandise imports and payments of services and income, the same import cover reported for June.

“It is also equivalent to 6.3 times the country’s short-term external debt based on original maturity and 4.5 times based on residual maturity,” the BSP added.

The central bank forecasts the country’s international reserves to reach $81.6 billion by end-2015.

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