The Bangko Sentral ng Pilipinas’ (BSP) foreign exchange (FX) swap transactions increased to $3.28 billion at the end of the third quarter, up from August’s $2.689 billion.
The FX swaps are all in long positions which indicates that the BSP is accumulating US dollars. The swap facility is one of the central bank’s intervention measures to protect the peso vis-à-vis other foreign currencies.
The current swap positions are higher than same period last year of $2.94 billion.
Based on BSP data, of the swaps in September, about $1.971 billion has residual maturity of up to one month and $1.309 billion has a longer maturity of more than one month to three months.
FX swaps are aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic currency including the forward leg of currency swaps.
Besides the use of FX swaps as market intervention, the BSP also use swaps to sterilize its reserves accumulation.
The BSP-managed gross international reserves (GIR) total $111.083 billion as of end-October, down from $112.706 billion as of end-September. The latest GIR level is still more than “adequate external liquidity buffer” that is equivalent to eight months’ worth of imports of goods and payments of services and primary income, according to the BSP. It is also equivalent to about 4.4 times the country’s short-term external debt based on residual maturity.
As a matter of policy, the BSP’s participation in the exchange rate market is limited to tempering sharp fluctuations in the exchange rate. The BSP also does not target nor avoid any level of the peso and does not alter currency trends.
At the moment, the peso is weaker than the US dollar at the mid P58-level.
The BSP’s reserve assets are composed of gold, foreign investments, foreign exchange, reserve position in the International Monetary Fund (IMF), and special drawing rights or SDRs in the IMF.
The central bank has foreign exchange of $2.139 billion as of end-October, up from end-September’s $2.041 billion and from same period last year of $1.236 billion.
Meanwhile under the GIR, the BSP’s gold reserves amounted to $11.353 billion, from $10.859 billion in end-September and $10.57 billion in October 2023. Foreign investments mainly in securities and bonds, reached $93.103 billion during the period, down from $95.199 billion in the previous month and from last year’s $84.728 billion.