The nation’s central bank said yesterday that its interventions in the foreign exchange market have been aimed at maintaining price stability rather than supporting local exporters.
At a legislative session on the long-term impact of the war on Iran on energy and consumer prices, central bank Deputy Governor Yen Tzung-ta (嚴宗大) said that exchange rate and price stability have long been prioritized over export considerations.
Taiwan’s foreign exchange reserves last month dropped by US$8.601 billion from the month before to US$596.886 billion, as the central bank launched a series of interventions in response to a strengthening US dollar.
Photo: CNA
In a report to lawmakers, the central bank said Middle East tensions continued to drive up global crude and other commodity prices, but the resulting imported inflation pressures remained manageable.
Yen said the central bank would continue to stabilize the exchange rate to help cushion the domestic economy from global commodity price fluctuations.
Democratic Progressive Party Legislator Kuo Kuo-wen (郭國文) raised concerns about depreciation pressure on the New Taiwan dollar and its potential to exacerbate inflation.
Kuo asked whether the central bank might adjust its approach to capital flows to discourage foreign investors from immediately remitting funds abroad after selling Taiwanese stocks, which he said could help ease downward pressure on the currency.
Yen responded that such measures would be difficult to implement, citing the principle of free capital movement. He added that under the rules, if foreign investors do not immediately repatriate funds after selling shares, the capital must remain invested in Taiwan’s stock market.
Taiwan’s foreign exchange reserves fell below the US$600 billion mark at the end of last month, with the central bank reporting a total of US$596.89 billion — a decline of US$8.6 billion from February — ending a three-month streak of increases. The central bank attributed the drop to a combination of factors such as outflows by foreign institutional investors, currency fluctuations and its own market interventions. “The large-scale outflows disrupted the balance of supply and demand in the foreign exchange market, prompting the central bank to intervene repeatedly by selling US dollars to stabilize the local currency,” Department of Foreign
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