Large dollar hoard to keep peso strong––Diokno

June 19, 2019
Benjamin Diokno

Bangko Sentral Gov. Benjamin Diokno on Tuesday said he expects the peso to remain strong because of the solid growth of investments and continuous dollar inflows.

On Tuesday, it ended the trade at 51.99 against the greenback from the previous session’s 52.145.

The peso has been touching the 51-level against the US dollar in recent days, partly because of the market's volatility and because of investors’ confidence in the domestic economy.

“We have lots of idle dollars that we’re not able to use,” he told journalists after the launch of the annual Citi Microentrepreneurship Awards at the BSP office in Manila.

Diokno said the BSP has lots of idle dollars due also to the government’s debt paper issuances.

Last May, the Philippine government issued EUR750 million-worth of eight-year global bonds, which marks the country’s return to the European capital markets after more than a decade of absence.

In the same month, the government issued RMB2.5 billion worth of three-year renminbi-denominated Panda bond, which was issued by non-Chinese issuer in China.

These debt papers were issued as the government diversifies its investment options and make its presence in overseas debt market more visible.

Aside from these issuances, the BSP chief said tourist arrivals to the country remain “hefty” and these bring in additional dollars.

Foreign direct investments inflows are also boosting the country’s dollar reserves, he said.

BSP data show that as of end-March this year, FDIs posted a net inflow of $1.9 billion. However, it is lower than year-ago’s $681 million net inflow.

Another driver of the peso is the remittance inflows, Diokno said.

In the first four months this year, total remittances rose 3.7 percent year-on-year to $10.8 billion.

Diokno said inflows from Filipino workers overseas remain robust, notably during the enrollment period and Christmas season.

As of end-May this year, the country’s gross international reserves rose to $85.02 billion, equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

Authorities said the ideal dollar reserve of a country is about three months worth of imports of goods and payments of services.