FX reserves decline

AS of the Sept 20, the level of foreign exchange reserves declined further to K6.46 billion (US$1.93bil) reflecting continued intervention by the central bank to support the foreign exchange market.
According to the Bank of Papua New Guinea’s second quarter (Q2 2019, April-June) Economic Bulletin, Governor Loi Bakani said the level of foreign exchange reserves at the end of June fell to K6.83 billion (US$2.045bil), from K6.899 billion (US$2.08bil) at the end of March.
Global inflation is expected to remain low reflecting the slowdown in global growth and partly due to lower energy prices, especially in the advanced economies.
In response to lower inflation, major central banks have either lowered their monetary policy rates or left them unchanged.
Bakani said that these developments helped dampen the impact of foreign inflation on domestic prices partly resulting in lower domestic inflation outcomes.
As a result, the Bank of PNG eased monetary policy by reducing the policy rate, the Kina Facility Rate (KFR), by 25 basis points from 6.25 per cent to 6.00 per cent in July and again by 50 basis points to 5.50 per cent in August.
As at the Sept 20, the average daily kina exchange rate depreciated against all currencies except the pound sterling.
The kina depreciated against the Japanese yen by 2.0 per cent to ¥31.8626; US dollar by 0.4 per cent to US$0.2945; Euro by 0.4 per cent to €0.2623; and the Australian dollar by 0.3 per cent to A$0.4212.
Against the pound sterling, it appreciated by 2.4 per cent to £0.2358.
These currency movements resulted in the Trade Weighted Index (TWI) depreciating by 0.6 per cent to 29.4.