Central bank governor Perng Fai-nan (彭淮南) yesterday defended the bank’s currency policy, as Taiwan’s foreign exchange reserves fell US$11.12 billion last month from August, representing the largest decrease in history.
The nation’s foreign exchange reserves amounted to US$389.17 billion as of the end of last month, the lowest level since January, but Taiwan retained its position as having the world’s fourth-largest reserves, behind China, Japan and Russia, the central bank’s data showed.
“The sharp fall in foreign exchange reserves proves that the central bank does not focus only on curbing the appreciation of the New Taiwan dollar, while ignoring its depreciation,” Perng said during a legislative question-and-answer session.
Foreign capital outflows were the main factor for the fall last month, Perng said.
Foreign capital outflows totaled US$4.26 billion, bringing the overall outflow in the third quarter to US$14.31 billion, the second-highest level in history, Financial Supervisory Commission data showed.
Foreign investors sold substantial holdings of equities and bonds last month, while reducing their NT dollar deposits substantially and repatriating earnings, further lowering the nation’s foreign exchange reserves, the bank said in a statement.
In addition, the euro and other major currencies depreciated against the US dollar last month, driving down the value of foreign exchange reserves denominated in those currencies in terms of the reserve currency, the statement said.
The market value of securities investments and deposits held by foreign portfolios was US$184.9 billion as of last month, equivalent to 48 percent of all foreign exchange reserves, lower than the 66 percent posted in January, according to the bank’s data.
Compared with Taiwan, South Korea’s foreign exchange reserves only fell by US$8.8 billion last month, while India’s foreign exchange reserves fell US$8 billion.
“Do these results show that foreign investors are pessimistic about the Taiwanese market?” Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao (賴士葆) asked Perng.
Foreign capital outflows reflected investors’ worries that Asian economies would be impacted by the slowdown in the US and the eurozone, although they helped lower the pressures of excess liquidity in the market, Perng said.
However, Perng said he remained confident in the local market, as the proportion of reserves held by foreign investors still remained relatively high.
Meanwhile, Perng reiterated that the bank’s currency policy does not favor specific industries.
Last month, Taiwan Semiconductor Manufacturing Co (台積電) chairman Morris Chang (張忠謀) said the government, including the central bank, was not doing enough to protect local firms from the impact of the strong appreciation of the NT dollar.
The NT dollar closed at NT$29.025 against the greenback on Sept. 2, before Chang’s comments. Since then, the NT dollar has depreciated 4.6 percent, closing at NT$30.632 yesterday.
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