Taiwan’s foreign exchange reserves last month rose by US$466 million to a record US$548.87 billion, as exporters offloaded US dollars and local investors raised stakes in US dollar-based assets ahead of anticipated interest rate hikes, the central bank said yesterday.
The nation’s foreign exchange reserve rose for the sixth consecutive month thanks to robust demand from companies and organizations around the world for Taiwan-made electronics needed to drive digital transformation, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said.
Strong exports explain why the New Taiwan dollar appreciated in the past two years, Tsai said, adding that US Federal Reserve’s money-printing program has weighed on the US dollar.
Photo: Tyrone Siu, Reuters
Taiwan’s central bank asked exporters before the Lunar New Year to sell their US dollar possessions at different times to avoid a spike in the local currency’s valuation, Tsai said.
Profitable Taiwanese companies normally distribute year-end bonuses prior to the Lunar New Year, putting appreciation pressure on the NT dollar.
Tsai said the central bank has made the plea throughout the year.
The latest gain in foreign reserves was also linked to the central bank’s management skills, the official said, after the euro softened 1.62 percent, the British pound shed 0.67 percent, the Japanese yen lost 0.27 percent and the Chinese yuan gained 0.13 percent.
“In all, the foreign exchange market saw largely balanced supply and demand,” Tsai said.
Local investors have begun displaying more interest in US dollar-denominated assets after the Fed and other major central banks turned hawkish, Tsai said.
Such movements gain momentum when 10-year US Treasury yields rise above 1.75 percent, he added.
The yield is approaching 2 percent after the Fed last month indicated plans to raise interest rates by 25 basis points next month at the earliest to battle inflation.
Global fund realignments accounted for bond and stock market corrections last month, with wild volatility likely to persist for a short while, Tsai said.
Taiwan last month registered US$1.83 billion of net capital outflows, after foreign portfolio managers remitted US$3.24 billion to Taiwan, but transferred US$5.06 billion of gains abroad, Tsai said.
Local shares, debt and local currency deposits held by foreign players totaled US$735.7 billion, or 134 percent of foreign exchange reserves, he said, adding that the ratio is acceptable.
Taiwan remains the world’s fifth-largest foreign exchange holder after China, Japan, Switzerland and India, the central bank said.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
BRAVE NEW WORLD: Nvidia believes that AI would fuel a new industrial revolution and would ‘do whatever we can’ to guide US AI policy, CEO Jensen Huang said Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) on Tuesday said he is ready to meet US president-elect Donald Trump and offer his help to the incoming administration. “I’d be delighted to go see him and congratulate him, and do whatever we can to make this administration succeed,” Huang said in an interview with Bloomberg Television, adding that he has not been invited to visit Trump’s home base at Mar-a-Lago in Florida yet. As head of the world’s most valuable chipmaker, Huang has an opportunity to help steer the administration’s artificial intelligence (AI) policy at a moment of rapid change.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
RSS