Friday, 19 November 2010

Dollar reserves to hit $60b

by Roderick T. dela Cruz
Manila Standard

Bangko Sentral Gov. Amando Tetangco Jr. on Wednesday said the country’s gross international reserves may reach close to $60 billion by the end of the year, given the strong foreign exchange inflows that placed the level at $56.85 billion at the end of October.

“It will be closer to $60 billion,” Tetangco told reporters.

Monetary authorities allowed foreign-currency swaps to mature, making the dollars part of the stock, Tetangco said in a briefing. The Philippines will probably exceed the balance of payments surplus target for the year, he said.

Tetangco said the country’s external position has remained comfortably in surplus and the GIR has been rising to new highs, while the volatility of the peso-dollar exchange rate has remained in the middle of the range of the volatilities of currencies in the region.

He noted that strong foreign exchange inflows continued to build the country’s balance of payments position. “At the rate we are going, full-year BoP surplus could be higher than $8.2 billion,” he said. The BoP surplus stood at $6.5 billion in the first nine months of the year.

Tetangco said the country’s economic fundamentals were well in place, which could support economic growth of 7 to 8 percent for the year. Inflation rate is also manageable, giving the monetary board an elbow room to become flexible in its policy interest rates.

“We can adopt a stance that continues to support economic growth. There’s no immediate threat to inflation,” he said.

“For 2010, we expect the average inflation rate to be below the midpoint of the target range which is 3.5 percent to 5.5 percent,” he said.

Despite the strong foreign exchange inflows which tend to help the peso to move upward, Tetangco said Bangko Sentral is not targeting any particular exchange rate.

“We have this policy of allowing the peso to respond to market forces,” he said. “But the Bangko Sentral can participate from time to time basically to smoothen the sharp fluctuations in the exchange rate. We do not go against the fundamental trend.”

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