Taiwan’s foreign exchange reserves hit a record US$605.487 billion last month, rising for three consecutive months and up US$1.03 billion from the previous month, the central bank reported yesterday.
February is typically a peak month for investment income, which helped boost the central bank’s foreign exchange reserves, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said.
However, gains were partly offset by the central bank’s intervention in response to market volatility following US President Donald Trump’s announcement of Kevin Warsh as his nominee to succeed US Federal Reserve Chair Jerome Powell, whose term ends in May.
Photo: CNA
Movements among other major currencies also affected foreign exchange reserves after the portfolio of non-US dollar assets was converted into the US currency, Tsai said.
The US dollar index rose 0.64 percent last month, while most major non-US currencies weakened, with the British pound falling 1.43 percent, the yen losing 1.27 percent and the euro down 0.86 percent. In contrast, the yuan appreciated 1.63 percent, the central bank said.
Meanwhile, foreign investors’ holdings of Taiwanese stocks, bonds and New Taiwan dollar-denominated deposits reached US$1.47 trillion last month, equivalent to about 243 percent of Taiwan’s foreign exchange reserves.
Both figures are the highest on record and up from US$1.297 trillion and a ratio of 215 percent in the previous month, central bank data showed.
Foreign investors remitted about US$11.5 billion into Taiwan’s market last month, mainly around the Lunar New Year holiday, Tsai said.
After about US$7 billion in profit repatriation, net capital inflows totaled about US$4.5 billion.
The war in the Middle East has triggered greater fluctuations in global financial markets this week, with the TAIEX plunging from about 35,000 points to just more than 32,000 points in three sessions.
At the same time, the NT dollar also fell as much as NT$0.444 against the US dollar from Monday to Wednesday, Tsai said.
The market volatility was mainly driven by risk aversion, but “the biggest shock should have ended,” as investors are gradually returning focus to fundamentals, he said.
Unless geopolitical conflicts escalate further, the probability of similar sharp fluctuations occurring again in the short term is relatively low, he added.
Tsai also confirmed that the central bank had stepped in to smooth volatility over the past three days, but he emphasized that exchange rates are determined by market supply and demand, as well as global political and economic developments.
However, “the central bank’s intervention itself is a signal” to stabilize the market, he added.
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