Taiwan’s Forex Reserves Recover to US$600 Billion Following Central Bank Intervention

Taipei, Sept. 5 (CNA) Taiwan’s foreign exchange reserves increased from the previous month, returning to the US$600 billion threshold at the end of August after the central bank entered the forex market to prevent the U.S. dollar from weakening further against the Taiwan dollar.

Data released by the central bank on Friday showed the country’s forex reserves stood at US$601.90 billion at the end of August, representing a US$7.63 billion increase from the previous month and ending a two-month decline. The data indicated this rebound marked the highest year-on-year increase in more than a year.

Speaking with reporters, Tsai Chiung-min (蔡炯民), head of the bank’s Foreign Exchange Department, explained that foreign institutional investors withdrew substantial funds from the local market in July after receiving significant cash dividends from the listed companies in which they held stakes, which contributed to the Taiwan dollar’s depreciation.

However, the situation shifted in August as foreign institutional investors recorded a net fund inflow of approximately US$1.2 billion into Taiwan, seeking opportunities in the local equity market that had experienced considerable volatility in the preceding month. This capital influx provided support for the Taiwan dollar, Tsai noted.

To maintain stability in the local foreign exchange market, Tsai indicated the central bank intervened by purchasing U.S. dollars and selling Taiwan dollars to moderate the American currency’s decline.

Market analysts observed that without the central bank’s intervention, the U.S. dollar could have experienced a more pronounced depreciation.

Tsai did not provide details on the amount the central bank expended on market intervention in August. Late last year, the bank issued a joint statement with the U.S. Treasury Department indicating it would disclose this figure on a quarterly basis.

Beyond the central bank’s intervention, the growth in forex reserves during August also reflected improved returns from the bank’s portfolio management and currency exchange rate fluctuations of other reserve currencies against the U.S. dollar during the month.

Meanwhile, central bank data revealed that as of the end of August, foreign investors held US$1.861 trillion in Taiwan-listed stocks, bonds, and Taiwan dollar deposits, compared to US$1.663 trillion at the end of July.

These holdings represented the equivalent of 309 percent of Taiwan’s total forex reserves in August, up from 280 percent the previous month, according to the central bank.

A strong recovery in the Taiex, the Taiwan Stock Exchange’s benchmark index, which rose sharply by 6.98 percent, reflected the increase in these foreign holdings.

The central bank has stated it will maintain substantial forex reserves to ensure the stability of domestic financial markets and guard against potential sudden outflows of funds by foreign institutional investors.

Source link