Taiwan’s forex reserves hit high on central bank market intervention

Taipei,  Taiwan’s foreign exchange reserves hit a new high at the end of September as the central bank entered the forex market to prop up the U.S. dollar in a bid to limit the appreciation of the Taiwan dollar, the bank said Wednesday.

Data compiled by the central bank showed the country’s forex reserves as of the end of September rose US$1.429 billion from a month earlier to reach a record high of US$499.598 billion.

Speaking to reporters, Henry Yen (顏輝煌), head of the bank’s Foreign Exchange Department, cited the bank’s intervention to cap the increase in the value of the Taiwan dollar by buying the greenback as one of the reasons for the growth in reserves.

Yen said the growth also resulted from an increase in additional returns on the bank’s foreign currency investments.

In addition, Yen said, non-U.S. dollar currencies in the central bank’s portfolio of managed forex reserves, such as the Australian dollar, moved higher against the greenback so when the assets denominated in non-U.S. dollar currencies were calculated in U.S. dollar terms, their value increased, accordingly, boosting Taiwan’s forex reserves for the month.

Commenting on the central bank’s intervention in the forex market, Yen said the Taiwan dollar’s appreciation came after large foreign fund inflows, which led to severe fluctuations in the local currency so it was the central bank’s responsibility to smooth the movement and stabilize the Taiwanese currency.

Yen said the Taiwan dollar, which rose 1.3 percent against the greenback in September, was not the only currency in the region to move higher against the U.S. dollar on the back of large fund inflows into the region.

According to Yen, the South Korean won appreciated 1.56 percent against the U.S. dollar, the Chinese yen gained 0.63 percent, and the Japanese yen added 0.19 percent in September.

Meanwhile, the value of foreign investor’s holdings of Taiwanese stocks, bonds, and Taiwan dollar-denominated deposits as of the end of September rose US$4.9 billion from a month earlier to US$489 billion.

Those holdings were equal to 98 percent of Taiwan’s total foreign exchange reserves as of the end of September, up from 97 percent at the end of August, the central bank’s data showed.

The central bank has said it will ensure ample forex reserves to maintain stable financial markets at home and protect against the contingency of foreign institutional investors suddenly moving funds out of the country.

 

Source: Focus Taiwan News Channel

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