Dollar reserves hit 16-month high

The peso could gain some support even amid some volatility in the foreign exchange market as the Philippines’ dollar reserves hit its highest level in over a year, analysts said.

“The relatively higher GIR (is seen) to provide a greater buffer for the peso exchange rate vs. the US dollar, as fundamentally supported by the continued growth in the country’s structural US dollar inflows especially from OFW (overseas Filipino worker) remittances, BPO (business process outsourcing) revenues, tourism receipts, foreign investments, among others,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail.

This came after the country’s gross international reserves (GIR) stood at a 16-month high of USD 112.515 billion in January, climbing by an annual 8.95% from USD 103.271 billion a year ago, based on preliminary data from the Bangko Sentral ng Pilipinas (BSP).

It was the highest GIR level since the USD 112.707 billion recorded at end-September 2024.

Month on month, it went up by 1.52% from USD 110.833 billion in December.

Analysts said the uptick in foreign reserves was driven by higher dollar inflows as well as valuation gains from the central bank’s foreign investments and gold holdings.

“The jump in GIR mainly reflects stronger dollar inflows — from exports, BPOs, and remittances — alongside higher valuations of the BSP’s foreign investments and gold holdings, which helped push reserves to their highest in over a year,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

International reserves are the central bank’s foreign assets held mostly as investments in foreign-issued securities, foreign exchange and monetary gold, among others.

These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDRs).

The BSP said the level of dollar reserves in January is enough to cover about 4.1 times the country’s short-term external debt based on residual maturity.

It also equates to 7.5 months’ worth of imports of goods and payments of services and primary income, more than double the three-month standard.

“The latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the BSP said in a statement released late on Friday.

Preliminary central bank data showed that its gold holdings amounted to USD 20.667 billion at end-January, surging by 75.87% from the USD 11.751 billion seen a year ago. It also climbed by 11.25% from USD 18.578 billion at end-December.

However, the central bank’s foreign investments fell by 0.47% year on year to USD 85.966 billion in January from USD 86.368 billion a year ago, and by 1.11% from USD 86.926 billion a month ago.

Meanwhile, the Philippines’ reserve position in the IMF stood at USD 730.2 million, up by 8.77% from USD 671.3 million a year earlier and by 0.4% from USD 727.3 million in the previous month.

SDRs — or the amount the Philippines can tap from the IMF’s reserve currency basket — were 5.66% higher at USD 3.943 billion as of end January from USD 3.732 billion last year. It was unchanged from December.

On the other hand, the BSP’s foreign exchange holdings soared by 61.48% to USD 1.208 billion from USD 748.2 million the prior year and by 83.34% from USD 659 million at end-December.

“With GIR now comfortably above traditional adequacy metrics, it gives the BSP enough firepower to smooth volatility, reassure markets, and keep the peso from overshooting even when global conditions turn choppy,” Mr. Ravelas said.

Meanwhile, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the latest GIR level equips the BSP with ample resources to protect the peso from excessive fluctuations.

“While it cannot fully prevent depreciation driven by global USD (US dollar) strength and risk sentiment, the current reserve level helps anchor market confidence and allows calibrated intervention to prevent disorderly currency swings,” he added via Viber.

The local unit had a weak performance at the start of the year as it continued to trade around the PHP 58- to PHP 59-a-dollar level. On Jan. 15, it closed at PHP 59.46 against the greenback, breaking the previous record low of PHP 59.44 seen just the day prior.

On Friday, the local unit gained 10.5 centavos to close at PHP 58.585 versus the dollar from its PHP 58.69 finish on Thursday.

The BSP expects GIR to reach USD 110 billion by yearend. — Katherine K. Chan