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PNG FX Market Turnover increases in 2022

Friday, January 20, 2023

Foreign exchange turnover growth was driven by both increased BPNG interventions and higher receipts from commodity exports.

According to the 2022 BSP Quarter 4 Pacific Economic and Market Insights Report, foreign exchange (FX) market turnover for 2022 increased by 17.3% compared to the prior year.

BSP Group General Manager for Treasury Mr. Rohan George said, “FX turnover in 2022 was supported by strong commodity prices, in particular Oil, Copper, Palm Oil, and Coffee. These firmer commodity prices assisted to offset the lost FX inflows from the closure of the Porgera gold mine.”

“BPNG intervention in the FX market in the December quarter 2022 rose 51% compared to the September quarter” according to Mr. George.

Mr. George added, “Outstanding FX orders with BSP fell by 70% in the past quarter, with large end of year FX inflows and Central Bank interventions more than offsetting large crude oil imports and pre-Christmas stocking.”

The PNG Kina (PGK) mid-rate was stable against the US dollar (USD) at 0.2840. The stability against the USD allowed the PGK to finish stronger against major currencies, due to the cross currency effect of the strong USD.

The PGK finished the year 6.8% stronger against the Australian dollar (AUD), with Mr. George explaining, “recessionary fears amid a tightening of monetary policy in Australia and widening unfavorable interest rate differentials, weakened the AUD early in the 2022 December quarter before rebounding at years end to remain broadly unchanged over the quarter.”

When speaking on BSP’s near-term outlook for the PNG FX market, Mr. George added, “After strong FX inflows in the December quarter, we expect post-Christmas import orders to increase in January and February, with FX inflows gaining momentum into the end of March.”

“To manage volatility in foreign currency flows, 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.” he concluded.