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FX swaps total $810 M in 2022 -- BSP

Published Feb 12, 2023 21:10 pm  |  Updated Feb 12, 2023 21:10 pm

The Bangko Sentral ng Pilipinas’ (BSP) foreign exchange (FX) swaps totalled $810 million in December 2022, the bulk of which carries a short one month maturity period.

About $760 million of the FX swaps have likely matured or released to the market in January, while $50 million have three months up to one year maturity.

In comparison, the entire 2021 was a dormant year with zero FX swaps.

US dollar Reuters/File Photo (Manila Bulletin)

FX swaps are considered as BSP’s unfiltered US dollar source. As one of its open market operations, it 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. Swaps are aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the local currency.

The BSP revived the FX swaps in September last year, which was the month when the peso fell to its record low of P59 against the US dollar. From September, the last time there was FX swaps was October 2020.

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.

By end-January 2023, the country’s US dollar reserves totalled $99.7 billion, lower compared to same time in 2022 of $107.68 billion.

The FX stock declined to its lowest level of $93 billion in September last year. But, the BSP was able to purchase US dollars in October to December 2022.

BSP Governor Felipe M. Medalla has said that the BSP is focused on ensuring a stable foreign exchange market and that it has an “unwavering commitment to use the tools at its disposal to stabilize the exchange rate” including its first defense which is the gross international reserves or GIR.

To replenish the GIR, the BSP “may tap other sources of dollars” such as the FX swaps and banks’ foreign currency deposit units.

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