Sat, Jun 05, 2010 - Page 11 News List

Central bank says it’s monitoring decline in euro

BLOOMBERG

The central bank said it’s monitoring the weakness in the euro, Spencer Lin (林孫源), head of the central bank’s foreign exchange department, told reporters in a briefing in Taipei yesterday.

Lin declined to disclose how much of Taiwan’s foreign exchange reserve is in euros, or whether the central bank plans to reduce the amount of euros it holds.

Foreign exchange reserves rose US$2.57 billion, or 0.7 percent, to a record US$360.12 billion last month compared with US$357.56 billion in April, the central bank said yesterday.

“The main factor responsible for the increase in foreign exchange reserves in May 2010 is returns from foreign exchange reserves management,” the bank said in a statement.

The euro depreciated almost 20 percent from last year’s peak in November as investors questioned its role as a reserve currency to rival the US dollar as well as the European Central Bank’s ability to defend its legal tender.

In Taipei trading yesterday, the NT dollar fell against the US dollar, reversing earlier gains, as the central bank intervened in the final minute of trading to support exporters. Lin said the central bank asked lenders to provide documents for currency forwards contracts in a move to curb speculation.

The NT dollar weakened 0.2 percent to NT$32.35 against its US counterpart as of the 4pm close local time, according to Taipei Forex Inc. The currency earlier advanced as much as 0.4 percent. It reached NT$32.418 on June 1 and June 2, the weakest level since Dec. 22, and was 0.5 percent down for the week.

“The Taiwan dollar is fully under the control of the central bank,” said Tarsicio Tong (湯健揚), a currency trader at Union Bank of Taiwan (聯邦銀行).

“Exporters always like to sell the US dollar at a higher level. They just take a look at what the central bank does. The next day, they can sell at a higher price,” he said.

Separately, the Ministry of ­Finance plans to sell NT$40 billion (US$1.2 billion) in 10-year bonds on Thursday next week, and the central bank will auction NT$100 billion of 364-day certificates of deposit on Friday next week to absorb market liquidity.

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