POSITIVE CHANGE:
After two months of declining foreign exchange reserves, Taiwan’s central bank said that last month had reversed the trend with gains
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By Crystal Hsu / Staff reporter
Taiwan’s foreign exchange reserves rose to again exceed US$600 billion last month, ending two months of declines, the central bank said on Friday.
Foreign exchange reserves are overseas assets held by a central bank that can be readily deployed, including foreign currency deposits and government securities.
Last month, reserves rose US$7.633 billion from a month earlier to US$601.904 billion, the biggest monthly increase in more than a year, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said during a news conference at the central bank in Taipei.
Photo: Reuters
The increase was driven mainly by investment returns on the central bank’s foreign currency assets, appreciation of major non-US currencies against the US dollar and the bank’s intervention in the foreign-exchange market to maintain orderly trading, Tsai said.
Last month, the US Dollar Index fell 0.49 percent, while most major currencies strengthened against the greenback. The euro and British pound each gained 0.68 percent, the Canadian dollar rose 0.91 percent, the yen advanced 0.49 percent and the yuan appreciated 0.35 percent, central bank data showed.
The New Taiwan dollar was the strongest performer, rising 2.51 percent against the greenback during the month, as foreign investors posted net inflows of about US$1.2 billion to hunt for bargains in the local equity market, Tsai said.
To help maintain the local foreign exchange market stable, the central bank intervened by buying US dollars and selling NT dollars to moderate the greenback’s losses, he said.
Tsai did not disclose how much the central bank spent in last month’s market intervention. The bank announced in a joint statement with the US Department of the Treasury last year that it would release the figure on a quarterly basis.
Tsai said it remained unclear whether the yen’s appreciation was driven by official intervention or short-covering. The yen has unique characteristics as a major international currency, including its role as a safe-haven asset and its use in carry trades, he said.
Movements in the yen could influence other Asian currencies, but the direction of individual currencies would ultimately depend on their own supply-and-demand dynamics, Tsai said.
Meanwhile, the central bank data showed that as of the end of last month, foreign investors held US$1.861 trillion in Taiwan-listed stocks, bonds and NT dollar-denominated deposits, up from US$1.663 trillion at the end of July.
These holdings were worth 309 percent of Taiwan’s total foreign exchange reserves last month, compared with 280 percent a month earlier, the central bank said. A strong rebound in the TAIEX, which rose 6.98 percent in the month, reflected the increase in these foreign holdings, it said.
Additional reporting by CNA
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