Wed, Oct 06, 2010 - Page 11 News List

Forex reserves rise again

RECORD HIGH:Taiwan’s foreign exchange reserves went up for the 23rd straight month to US$380.5 billion thanks to the appreciation of the euro, pound and yen

By Ted Yang  /  Staff Reporter, with agencies

The nation’s foreign exchange reserves rose for the 23rd consecutive month to a record high of US$380.5 billion last month, an increase of US$8.44 billion from the figure registered in August, the central bank said yesterday.

“The main factor responsible for last month’s increase was returns from foreign exchange reserves management,” said Lin Sun-yuan (林孫源), director-general of the bank’s Department of Foreign Exchange.

Lin said that last month the euro, pound and yen all appreciated against the US dollar, thus raising the balance of the nation’s foreign exchange reserves, which are priced in US dollar terms.

Last month, the euro climbed 7.1 percent, the pound jumped 2.5 percent and the yen edged up 1.4 percent, bank statistics showed.

Taiwan remained among the world’s top four in terms of foreign exchange reserves, tailing China, Japan and Russia.

China’s foreign exchange reserves totaled US$2.45 trillion at the end of June, up US$7.2 billion from March, while Japan’s increased to US$1.01 trillion in August, up US$4.9 billion from the previous month, central bank data showed.

Russia’s foreign exchange reserves rose to US$436.6 billion in August, down US$1 billion from US$437.6 billion recorded at the end of July, the report said.

The increase in the nation’s foreign exchange reserves could also be attributed to the central bank’s buying of US dollars in the past month to combat the local currency’s appreciation, which could hurt exports. On Monday, the NT dollar strengthened beyond NT$31 for the first time since August 2008.

In Taipei trading yesterday, the NT dollar surrendered its gains in the final minute of trading as the central bank intervened to rein in its appreciation, according to two traders familiar with the bank’s operations.

The currency ended little changed at NT$31.252 against the greenback, having been 0.6 percent higher a minute before the close of trading, according to Taipei Forex Inc.

It briefly touched NT$30.976 on Monday, before erasing most of its gains in late trading because of suspected intervention.

“Hot money flows into Asia,” including Taiwan, because of better growth, said Tarsicio Tong (湯健揚), a currency trader at Union Bank of Taiwan (聯邦銀行). “Asian central banks are very cautious and they may step into the market.”

The NT dollar’s appreciation of 2.4 percent over the past month has fueled growth concerns because of the country’s export-oriented economy.

Council for Economic Planning and Development Minister Christina Liu (劉憶如) said yesterday the recent appreciation of the NT dollar was “not surprising at all” because it simply mirrored the rise of other Asian currencies against the weakening US dollar.

Speaking on the sidelines of an economic seminar, Liu said most Asian currencies — especially the yen — have been relatively strong against the greenback recently.

Asian countries, however, have become less resistant to allowing their currencies to rise over the past six months, because of a growing focus on boosting domestic demand instead of relying heavily on exports, she said.

Liu said the NT dollar’s appreciation would not only benefit domestic-demand sectors, but also benefit manufacturers that need to import raw materials, as well as Taiwanese traveling abroad.

Moreover, she said that a country’s currency should reflect its genuine value, without favoring specific industries or people, and that its central bank needed to let the market reflect the currency’s value.

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