MikeLigalig.com

By LEE C. CHIPONGIAN
Manila Bulletin

The Bangko Sentral ng Pilipinas (BSP) wound down its swap positions by $1.6 billion on maturity to provide foreign exchange (FX) into the system and bought $2.43 billion from the spot market to smooth exchange rate volatility.

BSP's derivatives in the form of forwards and swaps decreased by 9.6 percent in May to $15 billion from April's short positions.

To further polish FX fluctuations, the BSP treasury department purchased $2.43 billion of FX from the spot market in the same period, based on a report to the Monetary Board. The same report said BSP's FX sales totaled $2.24 billion in May.

BSP noted that the peso-dollar rate will likely continue to appreciate, same as other currencies in the region as "risk aversion stemming from the euro zone sovereign debt crisis abated after the US reported upbeat economic data on home and auto sales."

By central bank definition, FX swaps are foreign currency assets in both short and long positions in forwards and futures. BSP conducts FX swaps to fund FX balances. It is a financial transaction between two parties which have agreed to exchange two currencies at a certain exchange rate in an agreed future date.

Of the swaps, $6.15 billion is maturing in one month, $5.55 billion in three months and $2.95 billion  in three months up to a year.

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