BSP's FX Swaps Total $4.4 Billion

The Bangko Sentral ng Pilipinas (BSP) reported that foreign exchange (FX) swaps totaled $4.403 billion in August, down from $4.727 billion in July.

The BSP resorts to FX swaps when the implied peso rate in the swap market is lower than the reverse repurchase or RRP overnight rate, which makes it a more cost-effective option.

This represents a significant increase from zero transactions during the same period last year, making the BSP's FX swaps a more robust source of unfiltered US dollars in 2023, according to the BSP.

These swaps have maturities of up to one month and up to three months.

According to BSP data, the residual maturity of up to one month amounted to $1.998 billion, up from $1.91 billion in July, while the maturity of up to three months decreased to $2.405 billion, compared to $2.817 billion in the previous month.

The BSP maintains long positions, indicating that it is buying US dollars from the foreign exchange market.

The BSP conducts FX swaps to sterilize its reserve accumulation. As of the end of September, the country's international reserves totaled $98.1 billion, a decrease from the $99.6 billion at the end of August.

The Philippine peso has remained stable at around P56 against the US dollar for weeks, despite occasional depreciation near the P57 level without crossing that threshold.

The BSP resorts to FX swaps when the implied peso rate in the swap market is lower than the reverse repurchase or RRP overnight rate, which makes it a more cost-effective option.

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