Taiwan’s foreign-exchange reserves increased unexpectedly to an all-time high of US$459.88 billion last month as returns from reserve assets managed by the central bank offset net outflows of foreign capital.
The nation saw an increase of US$1.38 billion in its foreign-exchange reserves last month, rising for the second consecutive month, the central bank said in a statement on Wednesday last week.
“The primary factor responsible for the increase in foreign-exchange reserves in August this year was the returns from foreign-exchange reserves managed by the bank,” it said.
The reserves consist of securities and deposits denominated in foreign currencies, including the US dollar, the euro, the pound, the yen and the yuan, the bank said.
Last month, Taiwan remained the world’s fifth-largest holder of foreign-exchange reserves, following China, Japan, Switzerland and Saudi Arabia, the central bank added.
At the end of last month, the market value of security investments and New Taiwan dollar-denominated deposits held by foreign investors reached US$396 billion, up US$2.3 billion from the previous month and a steady 86 percent of total reserves, the central bank said.
Foreign institutional investors purchased a net US$1.1 billion in Taiwanese shares last month, but the nation still saw a net fund outflow of US$625 million from foreign investors for the month, tallies released by the Financial Supervisory Commission on Wednesday showed.
“The third quarter is usually the peak season for listed companies in terms of cash dividend distributions. Fund outflows by foreign investors result as they remit funds after receiving large cash dividends,” First Capital Management Inc (第一金證券投顧) said in note on Friday.
“As foreign-exchange reserves are largely dominated by the US dollar, valuation changes due to a rising US dollar index countered the effect of depreciation in non-dollar currencies and the impact of fund outflows,” First Capital said.
“Coupled with returns from reserves managed by the central bank, those factors collectively contributed to an increase in reserves last month,” it added.
Last month, the US dollar index, which measures the greenback against other major currencies, rose 0.62 percent, while the euro and the pound fell by 0.28 percent and 0.91 percent respectively, central bank data showed.
Foreign-exchange reserves might rise further this month, because foreign institutional investors might slow the pace of outward remittances compared with the past two months and the central bank would continue sound fund management, First Capital said.
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