Two of Taiwan’s largest financial groups yesterday sought to reassure investors that they can weather currency volatility, following a rare joint statement by Taiwan’s central bank and the US Department of the Treasury that rekindled expectations of the local currency’s appreciation.
CTBC Financial Holding Co (中信金控) president and spokeswoman Rachael Kao (高麗雪) told an investors’ conference that the local currency is expected to maintain a long-term appreciation trend, with the New Taiwan dollar likely to hover at about NT$30 through the end of this year.
The NT dollar yesterday closed NT$0.030 lower at NT$31.180 against the US dollar in Taipei. The dip came despite the central bank saying in the joint statement on Friday that it would provide the US Treasury with intervention data quarterly beginning next month, up from twice a year previously.
Photo: CNA
Kao said the statement should not be seen as a shift in the central bank’s foreign-exchange policy or a restriction on Taiwan’s exchange-rate flexibility, adding that the US Treasury has previously issued similar statements for Japan, South Korea, Switzerland, Malaysia and Thailand.
Kao highlighted the local currency’s robust outlook, citing strong external balances and resilient capital inflows as supportive factors.
Taiwan Life Insurance Co (台灣人壽), a subsidiary of CTBC Financial, held NT$17.6 billion (US$564.46 million) in foreign-exchange reserves as of Sept. 30, Taiwan Life chief investment officer Yeh Pai-hung (葉?宏) said, adding that currency fluctuations within NT$2 would not materially affect its earnings.
If currency hedging costs — through instruments such as forwards, options or swaps — fall below 3 percent, the company would increase its hedge ratio, Yeh said.
Cathay Life Insurance Co (國泰人壽), Taiwan’s largest insurer by assets, said its foreign-exchange reserve fund provides ample room to absorb currency swings even if the NT dollar strengthens to NT$28 against the greenback.
“We do not expect a material impact from the expected currency appreciation,” Cathay Life spokesman Lin Chao-ting (林昭廷) said.
Lin emphasized that domestic insurers hold substantial offshore portfolios with investment horizons exceeding 20 years, so most foreign-exchange gains or losses remain unrealized and are reflected only on paper.
The life insurance sector has gradually reduced its reliance on traditional hedging tools, which carry elevated costs, in favor of expanding foreign-exchange reserves as a form of “self-insurance,” Lin said.
The sector has enhanced reserve buffers since May, when the NT dollar surged, with plans for an additional 30 percent increase by the end of the year, he said.
The measures leave local insurers well-positioned to withstand further currency volatility, should the NT dollar climb higher, he added.
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