Central bank Governor Perng Fai-nan (彭淮南) said yesterday that short-term capital flows have been a major factor affecting currency exchange rates in Taiwan, reiterating the bank’s duty to maintain a “dynamically stable” strategy.
Perng made the remarks while reporting to lawmakers from the legislature’s Finance Committee who visited the central bank yesterday.
His words also came a week after the Taiwan Stock Exchange revoked an unnamed foreign institutional investor’s right to buy local shares for violating foreign exchange regulations.
“They [the central bank] said they can control investors [speculating in the currency market],” said Democratic Progressive Party Legislator Hsueh Ling (薛凌), one of the committee’s conveners, citing Perng’s reports.
Currently, there are 6,858 foreign investors in Taiwan, whose foreign currency transactions account for around 36 percent of total foreign currency transactions, Perng said.
Meanwhile, 14 percent of capital flows were generated by the 20 foreign investors with the largest number of transactions, the central bank added.
The central bank will control these investors’ movements by instant reporting of their transactions, checking their current accounts and bank inspections.
On Oct. 22, the bank said it had detected a foreign institutional investor that had allegedly speculated on the currency market and never invested in domestic securities as it claimed. The central bank later sent the case to the Financial Supervisory Commission and related agencies for a decision.
In related news, the nation’s foreign exchange reserves hit their highest-ever level last month, which may help ease currency rate volatility, the central bank said.
It was the fourth consecutive month that the nation’s foreign exchange reserves had reached record-highs.
Foreign exchange reserves amounted to US$415.6 billion at the end of last month, an increase of US$2.99 billion from the end of the previous month, the bank said in its monthly report yesterday.
The appreciation of the euro and other currencies against the US dollar was the major factor responsible for the month-on-month increase in foreign exchange reserves last month, as foreign exchange reserves denominated in these currencies were worth more in terms of the base currency, the US dollar, the report said.
Returns from foreign exchange reserves management was the other factor behind the month-on-month rise, it said.
Taiwan still has the fourth-largest foreign exchange reserves in the world, behind China, Japan and Russia.