The central bank has amended foreign-exchange regulations for companies and individuals to give it more flexibility in curbing currency speculation in a timely fashion.
The changes, due to take effect on Feb. 17, come after moral suasion failed to discourage companies, especially exporters, from currency trading practices intended to hedge against foreign-exchange losses, but contributed to the New Taiwan dollar’s appreciation.
The central bank on Wednesday evening announced plans to revise foreign-exchange rules that over the years cap foreign currency settlements at US$50 million for companies and US$500,000 for individuals per year.
It added a clause allowing it to adjust the limits whenever necessary to maintain an orderly and stable foreign-exchange market.
The bank has called on local companies to help maintain the local currency’s stability, emphasizing that a strong NT dollar would hurt their own profitability.
The NT dollar has repeatedly climbed above the NT$28 mark in intraday trading against the greenback, before closing lower due in part to the central bank’s alleged last-minute intervention.
Major technology firms have told investors that unfavorable foreign exchanges are eating away their profits, despite strong revenue growth.
Some local firms reportedly borrow US dollars abroad and sell them at higher rates on the local market to guard against foreign-exchange losses.
Some have gone so far as to create front companies in a bid to circumvent the annual US$50 million limit per company, local reports said.
Most companies have never demonstrated settlement needs larger the threshold until recently, the central bank said last month, suspecting currency speculation on the part of exporters.
“The current indiscriminate treatment appears inadequate and the central bank would make timely adjustments to reflect real corporate needs,” the bank said, adding that the latest changes aim to close the loopholes.
Companies with greater settlement needs can file applications through their banks, it said.
Other companies allegedly seek to profit by borrowing US dollars from affiliates abroad with a view to benefitting from favorable exchange rates later, reports said.
Companies should seek funding in conventional ways and avoid questionable currency trading, the bank said.
The bank is also weighing disciplinary measures against four foreign lenders for helping grain merchants engage in currency trading, in contravention of foreign-exchange rules.
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