The central bank has adopted dynamic adjustments in its portfolio management of Taiwan’s foreign exchange reserves to reduce possible risks from fluctuations in US Treasury bonds, central bank Governor Yang Chin-long (楊金龍) said yesterday.
Yang made the statement at a meeting of the legislature’s Finance Committee in response to questions about reports that Danish pension operator AkademikerPension was planning to sell US$100 million of US Treasuries amid unease over US President Donald Trump’s push for control of Greenland.
Amid increasing efforts by several countries to decouple from the US, US Treasuries have encountered growing volatility, lawmakers said, expressing concern about the stability of Taiwan’s foreign exchange reserves.
Photo: Wang Yi-sung, Taipei Times
As Taiwan is the 10th-largest holder of US Treasury bonds, Chinese Nationalist Party (KMT) Legislator Wang Hung-wei (王鴻薇) asked whether the central bank would cut its position in US government bonds or adjust its foreign exchange reserves portfolio to reduce risk.
Yang said the central bank would seek to lower risks in foreign exchange reserves by cutting or adjusting US Treasury bond positions.
“That goes without saying,” he said.
As of the end of last year, Taiwan’s foreign exchange reserves was US$602.55 billion, its second-highest ever, central bank data showed.
During the legislative meeting, Yang downplayed concerns raised by the IMF over Taiwan’s exposure to US dollar-denominated assets.
In its latest Global Financial Stability Report, the IMF said Taiwan’s exposure to US dollar-denominated assets was 45 times its foreign exchange market size, compared with South Korea, where the exposure was 25 times its foreign exchange market size.
However, the central bank has a different exposure estimate, which is only 20 times the size of its foreign exchange market, Yang said.
“We are not nervous,” he said, adding that some of the IMF’s past forecasts of Taiwan’s economic growth have been far off the mark.
While Taiwan has agreed in a trade deal to provide US$250 billion in credit guarantees for financial institutions to invest in the US market, the country still maintains adequate foreign currency-denominated capital in the domestic market, he said.
Therefore, the central bank would have no need to use any of the country’s foreign exchange reserves as credit guarantees in the short term, Yang added.
Taiwan’s surplus savings is NT$5.42 trillion (US$172.02 billion), enough to support overseas investments by Taiwanese enterprises, the central bank said.
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