Taiwan’s foreign exchange reserves at the end of last month hit a new high of US$579.058 billion as the central bank jumped into the forex market to keep the US dollar from falling further against the New Taiwan dollar, the bank said on Thursday.
In addition, an increase in returns from the central bank’s management of its portfolio also boosted forex reserves in the month, while the strength of other non-greenback currencies pushed up forex reserves further when the assets denominated by these currencies were converted to the US dollar, the bank said.
Taiwan’s forex reserves rose sharply by US$7.318 billion from a month earlier to a record high of US$579.058 billion as of the end of last month, reversing a fall of US$1.559 billion seen at the end of July.
Photo courtesy of the central bank
Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said the weakness of the US dollar pushed the local forex market off a demand-to-supply balance in some trading sessions last month.
Subsequently, the central bank “stepped in to smooth out volatile capital flows to maintain an orderly foreign exchange market” by buying the greenback and selling the local currency, Tsai said.
The US dollar index, which tracks the value of the greenback to the currencies of Washington’s six major trading partners, fell 2.3 percent last month, the central bank said.
In the month, the NT dollar soared NT$0.896, or 2.82 percent, against the US dollar, while the yen, the Australian dollar, the Canadian dollar, the pound, the euro and the yuan surged 6.13 percent, 4.77 percent, 2.66 percent, 2.51 percent, 2.33 percent and 2.32 percent respectively, central bank data showed.
Meanwhile, central bank data showed that the value of foreign investors’ holdings of Taiwan-listed stocks and bonds, and NT dollar-denominated deposits rose from US$783.90 billion at the end of July to US$811.3 billion at the end of last month.
Those holdings represented 140 percent of Taiwan’s total forex reserves as of the end of last month, up 3 percentage points from the end of July.
Taiwan last month recorded a new inflow of US$1.417 billion from foreign institutional investors, with the cumulative new fund inflow reaching US$27.992 billion in the first eight months of this year, the Financial Supervisory Commission said.
The central bank has said it would maintain ample forex reserves to ensure domestic financial markets remain stable and guard against any sudden movement of funds out of the country by foreign institutional investors.
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