BSP Financial: Forex revenue up 9.8%

Currency (FX) liquidity and the kina performed well in the last quarter of 2021, with high commodity prices supporting FX market turnover growth of 9.8% over the past six (6) month.

According to BSP Financial Group Limited’s Pacific Economic and Market Insight Q4 report for 2021, high commodity prices in crude oil, copper, palm oil and coffee supported an increase in turnover on the Change market.

Accommodative monetary policy in the US led to a continued rise in the US dollar, and by extension the PNG kina/Australian dollar, for most of the quarter. Inflation, COVID-19 and monetary policy are the main trend drivers.

BSP Financial Group Managing Director, Treasury – Rohan George, in highlighting market performance, said firmer commodity prices, combined with increased project and donor specific foreign exchange inflows and year-end dividend payments, compensated for lost inflows in the foreign exchange market following the closure of the Porgera gold mine – a 75% lower foreign exchange inflow for Barrick. April 2022 remains the target date for the reopening of the Porgera mine.

“The Kina has been stable and unchanged against the USD at 0.2850 for the past 14 months; however, the decline in AUD/USD, amid the weakness in the Australian economy related to COVID- 19, the strength of the US economy helped strengthen the Kina/AUD The Kina should remain stable against the USD, while a stable AUD will lead to an improvement in the stability of the Kina/AUD cross rate”, said said Mr. George.

In terms of the outlook for the coming quarter, the BSP Treasurer said that the very strong foreign exchange inflows in December 2021 are expected to decrease in the March 2022 quarter. prices from the high levels seen in November, and this should reverse in January, February with the replenishment after Christmas.

“With market turnover declining and outstanding foreign exchange orders expected to increase in the first quarter of the year, corporate and retail customers can manage the volatility of foreign currency inflows by placing foreign exchange orders ( with correct documentation), as soon as possible and ensuring that orders are secured in cash pending execution, tax clearance certificates are up to date and reflect the expected execution time of FX orders,” said added Mr. George.

Meanwhile, the commodity recovery in Papua New Guinea remains steady, with prices of key agricultural exports – palm oil and coffee trending higher in the last quarter of 2021, both in due to supply constraints and strong demand.

Gold and precious metals were trending lower, constrained by a strong dollar, rising interest rates and reduced gold purchases. Copper prices have cooled significantly from November highs as central banks around the world begin to reign in pandemic-era stimulus packages.

Arabica coffee prices continue to rise, due to reduced coffee production from the main Brazilian producer and increased global demand for coffee, while LNG continues its bull run as demand surges in the fourth quarter, due to the energy crisis in Europe and post-COVID-19 supply chain disruptions.