Central bank Governor Yang Chin-long (楊金龍) on Friday said that short-term movement of foreign funds has affected the local foreign exchange market and posed a challenge to the bank’s foreign exchange stability.
Swift fund inflows and outflows in the local market have created volatile fluctuations for the New Taiwan dollar in the past few months, Yang told a meeting of the Chinese National Association of Industry and Commerce (工商協進會) in Taipei.
The central bank would continue its efforts to manage the floating value of the NT dollar by using its resources and through careful assessment of its monetary policy in a bid to smooth the volatility in the local forex market and maintain market order, he said.
The central bank recently made a rare revelation that it stepped into the local forex market in May and last month, when the NT dollar encountered a big swing in the wake of swift foreign fund flows. In May, the NT dollar fell 2.24 percent against the US dollar and last month rose 1.71 percent against the greenback, central bank data showed.
In addition to the intervention in the local forex market, Yang said that the central bank has built a well-functioning system to tally and analyze trading statistics to put a close watch on short-term, medium-term and long-term fund flows.
At a time of evolving financial technology, fast development of cryptocurrencies and rising popularity in digital payment systems, which are expected to affect the traditional business of domestic banks, the central bank has also set up a task force to study these developments, Yang said.
The central bank is tightening its supervision of mobile payments to ensure a stable local financial market, he said.
Commenting on low interest rates in global markets, Yang said that there is limited room for central banks around the world to further loosen monetary polices to stimulate the economy, although the world’s economy is slowing down.
The central bank left its key interest rates unchanged for the 10th consecutive quarter in its quarterly policymaking meeting last month, with the discount rate at 1.735 percent, although the Directorate-General of Budget, Accounting and Statistics in May lowered its GDP growth forecast for this year by 0.08 percentage points to 2.19 percent.
Yang urged the local business sector to increase wages for employees in an appropriate manner, which he said would help bolster domestic demand and encourage employees to work harder, boosting productivity.
Wage hikes would benefit the local economy as a whole, he said.
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