Taiwan’s Forex Reserves Surge Past $600 Billion, Ending Two-Month Downturn

FOREX REVERSAL: Taiwan’s central bank reports a significant rebound in foreign exchange reserves after two consecutive months of declines

• By Crystal Hsu / Staff reporter

Taiwan’s foreign exchange reserves climbed above the US$600 billion threshold last month, reversing a two-month downward trend, according to the central bank on Friday.

Foreign exchange reserves comprise readily deployable overseas assets, such as foreign currency deposits and government securities.

Reserves increased by US$7.633 billion month-over-month to reach US$601.904 billion, marking the largest monthly gain in over a year, Department of Foreign Exchange Director-General Eugene Tsai stated at a Taipei news conference.

Photo: Reuters

The rise was primarily attributed to investment returns on foreign currency assets, the appreciation of major non-US currencies against the US dollar, and central bank intervention to ensure orderly trading, Tsai explained.

Data from the central bank indicates the US Dollar Index fell 0.49 percent last month, with most major currencies strengthening 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.

The New Taiwan dollar was the top performer, rising 2.51 percent against the greenback as foreign investors injected approximately US$1.2 billion in net inflows to capitalize on bargains in the local equity market.

To stabilize the local foreign exchange market, the central bank intervened by purchasing US dollars and selling NT dollars to curb the greenback’s losses, Tsai noted.

Tsai declined to disclose the exact amount spent on last month’s market intervention, though the bank announced last year alongside the US Department of the Treasury that it would release this figure quarterly.

Tsai said it remains uncertain whether the yen’s appreciation stemmed from official intervention or short-covering, citing the yen’s unique role as a safe-haven asset and its use in carry trades.

While yen movements can influence other Asian currencies, Tsai emphasized that the trajectory of individual currencies ultimately depends on their specific supply-and-demand dynamics.

Central bank data also revealed that foreign investors held US$1.861 trillion in Taiwan-listed stocks, bonds, and NT dollar-denominated deposits by the end of last month, up from US$1.663 trillion at the end of July.

These holdings represented 309 percent of Taiwan’s total foreign exchange reserves last month, up from 280 percent the prior month. The central bank attributed the increase to a strong rebound in the TAIEX, which rose 6.98 percent during the month.

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