Foreign exchange reserves soar to record US$570.6bn

• By Crystal Hsu / Staff reporter, with CNA

The nation’s foreign exchange reserves last month rose US$3.08 billion to another record high of US$570.6 billion, helped by capital inflows betting on rallies of technology shares linked to potential interest rate cuts by the US Federal Reserve, the central bank said on Friday.

It also came as the central bank continued market intervention to keep the New Taiwan dollar from rising further against the US dollar, as well as an increase in investment returns from portfolio management by the bank during the month, it said.

The central bank reported a net flow inflow of US$6 billion last month, lower than Financial Supervisory Commission’s US$8.68 billion tally, which failed to include outbound remittance of capital gains, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) told a news conference in Taipei.

Photo: Reuters

Foreign exchange reserves last year increased 22.82 percent, or US$15.66 billion, despite net capital outflow of US$4.5 billion, Tsai said.

Continued global monetary tightening last year drove international fund managers and investors to trim holdings in emerging stock markets and raise positions in US dollar-based investment portfolios that promise better returns, he said.

The trend took a steep turn after the Fed early last month sent dovish-leaning messages that the monetary tightening cycle is approaching an end and it is contemplating interest rate cuts in the coming months.

Against this backdrop, the NT dollar appreciated 1.64 percent against the greenback last month after a 3.71 percent plunge the previous month, the central bank said.

The NT dollar was not the only non-greenback currency to move higher last month, with many other currencies also appreciating against the US dollar as the market rapidly changed its expectations about the Fed’s move to a rate cut cycle, which created volatility, he said.

The yen picked up 3.96 percent, the Swiss franc gained 3.45 percent and the Australian dollar rose 3.01 percent versus the greenback.

The yuan, which had previously weakened against the US dollar, also moved higher by 0.41 percent, he said.

Overall, Taiwan’s foreign exchange reserves rank as the world’s fourth-largest behind China, Japan and Switzerland, Tsai said.

The central bank’s data also showed the value of foreign investors’ asset holdings of Taiwan-listed stocks and bonds, and NT dollar-denominated deposits rose to US$640.8 billion at the end of last month, from US$605.1 billion the previous month.

The holdings represented 112 percent of Taiwan’s total foreign exchange reserves as of the end of last month, up from 107 percent at the end of November, the data indicated.