Taiwan’s foreign exchange reserves fell below the $600 billion mark at the end of October, totaling $596.437 billion. This was $4.308 billion less than at the end of September and marked the second consecutive monthly decline, Taipei Times reports.
Foreign exchange market interventions
The central bank sold US dollars and bought New Taiwan dollars to reduce fluctuations in the local currency. During the month, the New Taiwan dollar weakened by NT$0.626, or 1.93%, against the US dollar, said Eugene Tsai, director-general of the central bank’s foreign exchange department.
The exchange rate was affected by sell-offs on the stock market and significant outflows from foreign funds. Foreign institutional investors posted record net outflows of $28 billion, including due to the repatriation of cash dividends.
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Decline in the stock market and investor assets
The TAIEX index fell by 2,728.30 points, or 5.67%, during the month amid concerns over artificial intelligence spending. On one trading day, the net selling volume of foreign institutional investors reached NT$300 billion, or $9.16 billion. This caused a sharp weakening of the New Taiwan dollar and prompted central bank intervention.
Investment income and changes in the exchange rates of other currencies partially supported the level of reserves. The central bank also received significant interest payments on US Treasury securities through swap operations, which helped offset the impact of foreign exchange interventions.
Share of foreign capital
At the end of October, foreign investors held Taiwanese stocks, bonds and New Taiwan dollar deposits worth $1.743 trillion, compared with $1.927 trillion a month earlier. This amount equaled 292% of Taiwan’s foreign exchange reserves, while the figure stood at 321% at the end of September. The central bank said it would maintain sufficient reserves to ensure the stability of domestic financial markets and protect against sudden capital outflows.
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