The central bank is stepping up oversight of the inflow of overseas funds in an attempt to safeguard the local currency from possible attacks by international speculators, the bank's governor said yesterday at the legislature.
Governor Perng Fai-nan's (
The NT dollar has gained 3.44 percent against the US dollar over the past two months.
"We are closely monitoring foreign investors' [NT dollar] accounts every day," Perng said in response to legislators' expressions of concern that the currency could be the target of foreign speculators.
Foreign fund managers now have about NT$150 billion NT dollar in deposits in Taiwan, with only half of the amount used to purchase local stocks, Perng told the legislature's Finance Committee.
The amount was lower than over NT$200 billion of deposits during the same period last year, he said.
"We haven't found any significant increase" in foreign funds flowing into Taiwan now, Perng said.
As part of its efforts to protect the NT dollar from speculatory attacks, the bank plans to inform regulators if the money has not been used to buy local stocks within 30 days of entering Taiwan, Perng said.
Currently, overseas fund managers are not required to spend the funds within a specified period.
Perng yesterday also reiterated the bank's stance on maintaining the local currency's stability.
"The central bank will step in to make adjustments to keep NT dollar fluctuations in a manageable range if the currency overshoots on speculation," Perng said.
The bank will establish more effective measures to curb the currency's steep appreciation because of the constant inflow of overseas funds, Perng said.
However, he appeared to be opposed to the idea of pegging the NT dollar to the Chinese yuan in order to reduce the negative impact on the competitiveness of Taiwanese exporters as China, including Hong Kong, has overtaken the US as the nation's biggest export destination.
"The value of the NT dollar should be decided by supply and demand in the Taipei foreign exchange market. It's not a must for the local currency to keep a close correlation to the Chinese yuan," he said.
Perng's comments came after Minister of Economic Affairs Ho Mei-yue (何美玥) said that the NT dollar may follow the Chinese yuan in order to prevent local companies from losing competitiveness to Chinese rivals.
Perng, however, declined to comment on whether the central bank will divert part of its assets away from US dollars, saying that "the question is too sensitive and could cause turbulence in the international foreign exchange market."
Taiwan's foreign currency reserves, worth around US$266.4 billion, are the third-largest in the world, after Japan and China.
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