Taiwan’s central bank said it would rein in limits on the use of exchange-rate derivatives to combat currency speculation by foreigners.
Banks’ holdings of non--deliverable forwards and options in the New Taiwan dollar will be limited to 20 percent of their positions in the local currency with immediate effect, the central bank said in an e-mailed statement. The ceiling had previously been a third.
Deliverable forwards are exempt from the restrictions as they are used by local companies to protect earnings against exchange-rate fluctuations, it said.
The change is designed “to maintain order in the currency market and to prevent foreign speculative capital from intervening in the market,” the statement said.
The NT dollar has appreciated 3.5 percent to NT$30.425 versus the greenback in the past month, Asia’s best performance, and it touched a 13-year high of NT$29.481 yesterday. The central bank has intervened in the foreign-exchange market on most days for more than six months to check appreciation that may hurt exports, according to currency traders who declined to be identified because of the sensitivity of the matter.
Taiwan last month restored curbs on foreign investment in its debt, joining South Korea, Thailand and Brazil in seeking to limit currency gains that threaten export growth. Foreign funds can invest only up to 30 percent of their portfolio in government bonds and money-market products, the Financial Supervisory Commission said on Nov. 9, reintroducing limits that were scrapped in 1995.
Developing economies have stepped up attempts to curb volatility in their currencies as near-zero interest rates in the US and Japan spur demand for higher-yielding emerging-market bonds and equities.
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