FX liquidity rising in Q3: BSP


FOREIGN exchange (FX) liquidity has picked up since the second quarter of the year and this has been attributed to strong commodity prices, combined with project specific and donor foreign currency inflows, according to Bank South Pacific Financial Group Ltd (BSP).
Released in the bank’s Pacific Economic and Market Insights Q3 2021 Report, the PNG Kina has remained unchanged against the US dollar for a third consecutive quarter, while FX reserves at the end of June show a seven per cent quarter on quarter increase, off the back of favourable inflow.
The report also stated that as of June 30, the level of gross foreign exchange reserves was US$2.49 billion (about K8.5 billion).
Reserve levels have increased by seven per cent quarter on quarter in June, with favourable inflows offsetting the Central Bank’s monthly intervention of US$50 million (about K171.6 million).
While FX liquidity rose 17 per cent in the month of September, BSP Group general manager for treasury Rohan George said FX turnover over the past six months rose by 18 per cent, supported by strong commodity prices, in particular oil, copper, palm oil, and coffee.
“Firmer commodity prices, combined with increased project specific and donor foreign currency inflows offset the lost FX market inflows from the closure of the Porgera gold mine,” he said.
“Momentum in FX market turnover is likely to increase into year’s end. Outstanding FX orders have increased from low levels seen in June, and this is expected to continue in October and November with pre-Christmas import orders.
“We expect large foreign currency inflows in late November and December to satisfy any foreign currency backlog.
“And to manage reduced FX liquidity, businesses should place FX orders (with correct documentation), as soon as possible, ensure orders are cash backed whilst awaiting execution, tax clearance certificates are current and reflect the expected FX order execution time,” George added.
“It was also reported that the kina has been stable and unchanged against the US dollar for the past 11 months; however, the pullback in the AUD/USD (Australian dollars/US dollars), amid Coronavirus (Covid-19) related weakness in the Australian economy, strengthened the Kina/AUD, and the Australian dollar is expected to outperform into year’s end as the Australian economy opens up.”