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Philippines to continue investing in U.S. securities: BSP governor

(Xinhua)

13:23, August 08, 2011

About a fourth of the country's 71 billion U.S. dollars foreign exchange reserves will continue to be invested in U.S. securities no matter that country's fall from topnotch credit standing to double A positive or AA+, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said on Sunday.

"For the BSP, U.S. treasuries will continue to be within the allowable investible universe for our reserves even with the one- notch downgrade by Standard and Poor's. Dips in the value of U.S. treasuries will be compensated for by earlier diversification moves," Tetangco said in a text message.

The U.S. credit downgrade, its first since the New York-based ratings firm first extended the triple A or AAA standing in 1941, has prompted fears of a sell-off which could have huge consequences on the country'a ability to service maturing foreign loans or meet trade obligations.

Tetangco quickly ruled this out, saying that global liquidity has in fact grown significantly.

He asserted the U.S. market "remains the most liquid and deepest" and that while Europe has its own set of soverign debt problems that render its future fiscal and monetary stability uncertain, a huge sell of U.S. treasuries was not likely.

"Many still see the U.S. treasury market as safe haven," Tetangco said.

He also said investors and so-called real money funds have since diversified their holdings into emerging market debt and commodities.

"This partly explains the appreciation in these assets of late. In other words, the run up in these assets has been partly due to real, as opposed to speculative, demand," he added.

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