Sat, Sep 04, 2010 - Page 12 News List

Forex reserves hit new high of US$372 billion

By Crystal Hsu  /  STAFF REPORTER

Taiwan’s foreign exchange reserves hit a new high of US$372.06 billion at the end of last month, up US$1.96 billion from US$370.11 billion at the end of July, the central bank said yesterday.

Spencer Lin (林孫源), head of the central bank’s foreign exchange department, said the increase resulted mainly from the bank’s foreign exchange management.

The latest figure does not alter Taiwan’s ranking as the world’s fourth largest holder of foreign exchange reserves after China, Japan and Russia.

Tarsicio Tong (湯健揚), a currency trader at Union Bank of Taiwan (聯邦銀行), attributed the change in the level of foreign exchange reserves to the central bank’s frequent support of the US dollar in the local foreign exchange market to keep the New Taiwan dollar competitive against the South Korean won.

“The central bank has said it favors dynamic stability for local currency, meaning it will not tolerate too much volatility for Taiwan dollars,” Tong said.

As of yesterday, the local currency had weakened 0.38 percent so far this year, compared with a 1.03 percent drop in the Korean won during the same period.

The NT dollar closed nearly steady at NT$32.018 against the US dollar in Taipei trading yesterday, compared with NT$32.04 a day earlier, the central bank’s Web site said.

Stable foreign exchange is important for domestic firms with foreign trade, Tong said, adding that the sustained trade surplus also contributed to the increase in foreign exchange reserves.

In a related development, the central bank issued a statement earlier yesterday denying it had intervened in domestic construction or land financing.

The statement came after local media reported the central bank recently stepped up credit checks of domestic lenders over their construction and land loans, a sign of further tightening to cool the property market ahead of its quarterly board meeting later this month.

The central bank said that the credit check at issue is a quarterly routine, not a tightening measure.

Many economists expect the central bank to hike the discount rate by 12.5 basis points for the second time later this month, to help curb soaring housing prices.

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