Cargill Inc and Deutsche Bank AG are among a group of major foreign companies under investigation in Taiwan for allegedly speculating on the surging local currency last year, hindering the central bank’s efforts to rein in a rampant foreign-exchange market.
Eight of Asia’s leading food traders, with the help of six overseas banks, built a combined US$11 billion in their New Taiwan dollar deliverable forwards positions as of the end of July last year, the central bank said in a statement last week.
Cargill and Louis Dreyfus Co were involved, along with Deutsche Bank, Citigroup Inc, JPMorgan Chase & Co and Standard Chartered PLC, said people with knowledge of the matter, who asked not to be identified because they are not authorized to speak publicly.
Photo: Chen Mei-ying, Taipei Times
ING Groep NV and Australia & New Zealand Banking Group are also being investigated, a person familiar with the situation said.
The positions were based on overseas physical grain trades deliberately transacted via their Taiwan units to speculate on the local currency, affecting market stability, the central bank said.
The companies, which the central bank has not identified, had ceased the trades by the end of July last year.
The central bank is to announce punishments for four of the banks soon.
It has already settled with two other lenders.
The monetary authority cannot sanction the grain firms, but it is preparing to hand over detailed information about the case to other government agencies, such as the Ministry of Finance and the Financial Supervisory Commission, to allow them to investigate further.
At least some of the trades were specifically designed to profit from the rising NT dollar, the sources said, presenting a direct challenge to the central bank as it battled to contain a rapidly rising currency in its efforts to maintain a stable financial environment for the export-dependent economy.
The central bank last week said that the huge positions the commodity companies built up in deliverable forwards went beyond their actual business needs.
None of the commodity trades behind the forward positions, nor the principle parties involved, were in Taiwan, it said.
“Speculation is typically frowned upon by the central bank, as it could destabilize markets and distort pricing,” Malayan Banking Bhd senior currency strategist Christopher Wong (黃經隆) said in a message.
“The punishment aims to send a deterrence message and the central bank can use this as a means of ‘reminding the markets’ not to be a menace,” Wong said.
The NT dollar strengthened more than 6 percent in the 12 months leading up to July 31 last year, the biggest gain among Asian currencies.
It has continued to appreciate since then, triggering ongoing interventions that the central bank Governor Yang Chin-long (楊金龍) says are merely intended to “smooth” the gains to maintain financial stability.
The US last month responded by putting Taiwan back onto its watchlist of potential currency manipulators and urging the central bank to allow the NT dollar to appreciate further.
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