The central bank has released $3.18 billion foreign exchange in October even as the peso is keeping its strength vis-a-vis the US dollar.
The current Bangko Sentral ng Pilipinas (BSP) swap position is at $980 million in October from $4.49 billion in September. Swaps have maturities of one month, three months and up to one year. For now, the BSP is only maintaining up to one month.
The BSP uses its swap positions to unwind or release foreign currency into the system as a defensive mechanism against speculative flows or as tool to intervene in the exchange market.
The local currency last week appreciated by 0.04 percent week-on-week to P48.04 as the weak US dollar persisted.
FX swaps involves the actual exchange of two currencies – in principal amount -- on a specific date at a rate agreed on the deal date or the first leg, and a reverse exchange of the same two currencies at a date further in the future or the second leg at a rate different from the rate applied to the first leg, as agreed on deal date, according to the BSP.
As a strategy, the BSP supplements its FX accumulation by transacting in long positions in forwards and futures but it also uses the swaps to sterilize its US dollar purchases.
The country’s higher gross international reserves stood at $103.8 billion as of end-October, up from $85.83 billion same time in 2019. The big GIR has revived activity in FX swaps, one of BSP’s open market operations.