Prices support FX inflows: BSP

HIGH commodity prices are needed to support Foreign Exchange (FX) inflows, says a banker.
Despite the FX market turnover in last month’s third quarter falling 6.4 per cent from the June second quarter, the year-to-date increase was by 15 per cent compared to last year, and was supported by strong commodity prices of oil, copper, palm oil, and coffee.
Bank South Pacific (BSP) Financial Group Ltd’s general manager for treasury Rohan George said that according to their third quarter (July-Sept) Economic Insight report, firmer commodity prices had offset lost foreign exchange market inflows from the closure of the Porgera gold mine after Barrick Niugini Ltd’s inflow decreased by 75 per cent.
“Outstanding FX orders with BSP have doubled in the past three months, which is a result of light August and September FX inflows, large crude oil imports and pre-Christmas stocking,” George said.
After light FX inflows in the Sept quarter, pre-Christmas import orders are expected to increase this month and next month, before end of year FX inflows satisfy the market’s foreign currency appetite.
“Recessionary fears amid a tightening of monetary policy in Australia and widening unfavourable interest rate differentials weakened the Australian dollar and saw the Kina rise 10.4 per cent against the dollar, cushioning imported inflation on Australian goods.
“To manage changes in foreign currency flows, businesses should place FX orders (with correct documentation), making sure the orders are cash backed while awaiting execution, and that tax clearance certificates are current and reflect the expected FX order execution time.”