Forex reserves down slightly in October

Taipei, Taiwan's foreign exchange reserves as of the end of October were down slightly from a month earlier, after a three-month rising streak, due largely to a weaker euro against the U.S. dollar in the central bank's asset management portfolio, according to the bank.

Recent central bank data showed Taiwan's forex reserves at the end of October at US$460.18 billion, down US$263 million from a month earlier.

Harry Yen (???), head of the central bank's Foreign Exchange Department, said the euro depreciated against the U.S. dollar by 2.5 percent in October, therefore, the value of euro-denominated assets fell when they were converted into U.S. dollars in the central bank's asset management portfolio.

Yen said the decline in euro-denominated asset value also offset to some extent an increase in the returns from the central bank's forex reserve management.

According to the central bank, the holdings of Taiwanese stocks, bonds and Taiwan dollar-denominated deposits by foreign investors stood at US$341.2 billion at the end of October, down from US$394.3 billion at the end of September.

Foreign-held assets at the end of October were equivalent to about 74 percent of Taiwan's foreign exchange reserves, down from 86 percent the previous month and the lowest in 21 months, the central bank data showed.

Yen said the decline came amid volatility in the local equity market in October, when the benchmark weighted index on the Taiwan Stock Exchange plunged 10.94 percent on a huge foreign institutional sell-off amid fears over the trade frictions between the United States and China, as well as a quicker pace of interest rate hikes in the U.S.

In October alone, foreign institutional investors sold a net US$4.9 billion worth of shares on the local equity market, which pushed down the value of foreign-held assets in Taiwan's foreign reserves.

Due to a stronger U.S. dollar against regional currencies, including the Taiwan dollar, foreign investors rushed to move their funds out of the region, registering a net fund outflow from Taiwan of about US$4.72 billion, according to the Financial Supervisory Commission (FSC).

In the first 10 months of the year, the net fund exodus from Taiwan totaled US$10.87 billion, the FSC data indicated. However, Yen said, the local equity market now appears to have stabilized somewhat compared with October. So far this month, foreign institutional investors have bought a net NT$13 billion (US$422 million) worth of local shares, he said.

The central bank has repeatedly said it is committed to maintaining ample forex reserves by improving investment returns to guarantee secure financial markets at home, even if foreign institutional investors move funds out of the country.

Source: Focus Taiwan News Channel