• Oct GIR rise boosts buffer vs capital flows

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    THE Philippines’ gross international reserves (GIR) inched up to $81.14 billion in October, giving the country a higher buffer against external headwinds, central bank data showed on Friday.

    An analyst said a stronger local currency had helped and added that the increased GIR would cushion the impact of capital flows arising from a US Federal Reserve interest rate hike, now more likely to happen in December.

    The reserves were up by 0.7 percent from September’s $80.55 billion, and were 2.2 percent higher compared to $79.41 billion recorded a year earlier.

    The Bangko Sentral ng Pilipinas (BSP), in a statement, traced the uptick to net foreign currency deposits by the national government, revaluation adjustments to the central bank’s gold holdings and income from investments abroad.

    These were partially offset by national government payments of maturing obligations, it added.

    The latest GIR level is enough to cover 10.4 months of merchandise imports and payments of services and income, the central bank said, adding that it is also equivalent to 6.1 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.

    The BSP expects the country’s foreign reserves to reach $81.6 billion by yearend.

    Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI), said October was when Asian currencies rebounded, mainly as sentiment toward a Fed rate hike turned “with markets pushing back bets for a liftoff to 2016.”

    “Asian currencies rallied, as did the peso in the early part of the month, with the BSP looking to slow the appreciation trend at the same time build up its reserves anew,” he noted.

    Most emerging market (EM) countries were able to replenish reserves as well, with Malaysia and Thailand also posting gains in their GIR, Mapa said.

    With the Fed now more likely to raise interest rates in December, he said October had given EM central banks a chance to load up.

    “The replenished reserves give us a little more cushion and confidence going into the first Fed rate hike in nearly a decade,” he said.

    “We could see reserves either steady or lower if the Fed hikes in December and the peso is subjected to some severe depreciation spells, with the BSP looking to stem any violent upheavals in financial markets.”

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