Taiwan’s foreign-exchange reserves last month shrank US$1.32 billion to US$568.1 billion, the third consecutive month of declines, as the US dollar gained strength and the central bank stepped in to slow the local currency’s depreciation.
The retreat cost Taiwan its place as the fourth-largest holder of foreign-exchange reserves, overtaken by India, which had about US$200 million more.
“The US dollar last month picked up against major currencies on the back of a resilient economy and subdued expectations of interest rate cuts by the US Federal Reserve,” Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said.
Photo: Reuters
Fed officials have said they need more evidence to confirm that inflation is slowing before they can lower interest rates, but data suggest a bumpy road ahead.
Markets no longer believe that rate cuts would total more than 0.75 percentage points this year or happen before June, Tsai said.
US policy rates range from 5.25 to 5.5 percent, making US investment tools comparatively attractive, which is why global funds have flowed to US assets and US shares have repeatedly set records, he said.
Consequently, the New Taiwan dollar weakened 1.29 percent to NT$0.413 versus the greenback, Tsai said, painting the intervention last month as moderate and situational.
Managers of foreign portfolios oversold local shares even though the TAIEX benefited from the bullish sentiment thanks to domestic mutual funds, the official said, adding that two new exchange-traded funds, coded 00939 and 00940, made record gains toward the end of last month.
The phenomenon led foreign institutional players to realize profits and repatriate capital gains, Tsai said.
Still, foreign investors held US$729 billion of local securities and debts, constituting 128 percent of foreign-exchange reserves, the central bank said.
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