Market intervention sends foreign reserves down for 3rd month in October

Taipei, Nov. 4 (CNA) Continued market interventions by the central bank to prevent the Taiwan dollar from falling further dragged down the country’s foreign exchange reserves for a third straight month in October.

Data compiled by the central bank showed that Taiwan’s foreign exchange reserves stood at about US$561.08 billion at the end of October, down US$2.93 billion from September. At the end of September, the amount was down $1.46 billion from the previous month.

At the end of October, foreign exchange reserves fell to their lowest level since March, when their amount was 560.28 billion USD, according to central bank statistics.

In the first half of the year, the US dollar was largely below NT$30 against the Taiwan dollar.

However, the dollar surpassed NT$30 in early June and rose above NT$32 in September and continued to rise further to reach nearly NT$32.5 in late October on concerns of an aggressive US central bank on rate hikes. cycle, which led to investors putting their funds into US dollar-denominated assets.

Tsai Chiung-min (蔡炯民), head of the central bank’s foreign exchange department, said that as several major currencies fell against the US dollar in October following the central bank’s conversion of non-US dollar assets to the dollar, the value of those currencies subsequently fell.

In October, the U.S. dollar index, which measures the dollar’s value against the currencies of Washington’s six major trading partners, rose 0.41 percent, while the Canadian dollar, Australian dollar, Japanese yen and Chinese yuan fell 2.54 percent, 0.36 percent respectively. percent, 0.32 percent and 0.24 percent.

Tsai said a stronger U.S. dollar led the central bank to jump into the currency market again in October to maintain market order and minimize volatility facing the Taiwan dollar.

The silver lining was that the strength of the US dollar eased from the previous month, Tsai said.

The US dollar rose 0.5 percent against the Taiwan dollar in October, following a 1.17 percent increase in September.

In addition, Tsai said, the move by foreign institutional investors to move their funds out of Taiwan also weakened the Taiwan dollar, adding to a net outflow of US$5 billion by foreign institutional investors in October.

Tsai said the outflow of funds largely reflected weakness in the local stock market, where the Taiex, a weighted index on the Taiwan Stock Exchange, fell 352.47 points, or 2.16 percent, in October.

The Fed left its key interest rates unchanged at its latest policy-making meeting, held from Oct. 31 to Nov. 1, for the second straight session, prompting speculation that the current rate-hiking cycle is coming to an end and helping the non-U.S. dollar currencies including the Taiwan dollar are regaining their footing, Tsai said.

Meanwhile, as of the end of September, the value of Taiwan-listed stocks and bonds and Taiwan dollar-denominated deposits held by foreign investors rose to $524.6 billion at the end of October from $536.8 billion at the end of September. , central bank data showed.

Those holdings accounted for 93 percent of Taiwan’s total foreign exchange reserves at the end of October, down from 95 percent at the end of September, the data showed.

The central bank said it would maintain sufficient foreign exchange reserves to ensure the stability of domestic financial markets and resist any sudden movement of funds out of the country by foreign institutional investors.

(By Pan Tzu-yu and Frances Huang)

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