The Central Bank’s foreign exchange (FX) swaps as of June totaled $3.88 billion, $287 million lower compared to the previous month’s $4.17 billion.

FX swaps, which are derivative instruments in long forward positions, are part of government dollar reserves but it is not officially included in the tally of gross international reserves (GIR), which as of June have reached $39.49 billion. With the swaps, total GIR is actually $43.4 billion.

The Bangko Sentral ng Pilipinas (BSP) engages in FX swaps to manage both dollar load and domestic liquidity. It includes spot transactions and long positions in forwards and futures in foreign currencies.

Since 2008, the BSP has been unwinding its swap positions and in February alone it released almost $1 billion in the exchange market to ease pressures on the peso as well as boost liquidity supply. The BSP was winding down its swap positions as they mature to provide foreign exchange into the system.

In the meantime GIR includes the FX inflows, gold holdings, National Government borrowings and BSP’s income from its overseas investments and net foreign exchange operations.

As of June 30, about $34.168 billion of total GIR are reserves in convertible foreign currencies, of which $28.97 billion are in securities and $5.198 billion are in deposits, higher than May’s $3.93 billion deposits. Of the total deposits, $4.49 billion are in foreign banks while $707.49 million are in other central banks, the International Monetary Board and the Bank for International Settlements.

BSP’s gold reserves, in the meantime, totaled $4.71 billion in June, slightly lower than May’s $4.88 billion while its other reserve assets totaled $462.49 million. The BSP, similar to all central banks across the globe is currently accumulating reserves as buffer against the US-led recession and to ensure there will be no liquidity problems later on.

For the whole of 2009, BSP’s GIR forecast is conservative at $38 billion but it still expects balance of payments to end with a surplus of $700 million this year.