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Taiwan's forex reserves hit new high for 8th straight month
 

07/07/2023

Taipei, July 7 (CNA) Taiwan recorded a new high in foreign exchange reserves at the end of June for the eighth consecutive month largely due to an increase in returns from the local central bank's portfolio management, according to the bank.

In addition, with the value of European currencies against the U.S. dollar on the rise, when European currency denominated assets in the central bank's portfolio were converted into the greenback, Taiwan's forex reserves increased accordingly, the central bank added.

Data compiled by the central bank showed the country's forex reserves as of the end of June rose US$1.97 billion from a month earlier to US$564.83 billion.

According to the central bank, as the U.S. Federal Reserve left its key interest rates unchanged in its policymaking meeting held in June after recent aggressive rate hikes, the U.S. dollar index, which tracks the value of the currencies of Washington's six major trading partners, fell 1.36 percent in June.

As a result, the euro rose 1.63 percent, the British pound gained 1.87 percent and the Swiss franc grew 1.06 percent against the U.S. dollar in June. In addition, the Canada dollar and Australian currency also rose 2.94 percent and 2.05 percent, respectively, against the American unit in the month.

However, Asian currencies largely moved lower against the U.S. dollar in June with the Taiwan dollar under heavy pressure, falling NT$0.369 to dip below the NT$31 mark.

Tsai Chiung-min (蔡炯民), head of the central bank's Foreign Exchange Department, said although his bank jumped into the local currency market on a sporadic manner to smooth volatility suffered by the Taiwan dollar in June, the intervention was not behind the growth of the June forex reserves.

Tsai said the increase in the June forex reserves largely came from the central bank's portfolio management, emphasizing that the supply and demand in the local currency market remained stable.

Commenting on the weakness of Asian currencies, Tsai said, as China cut rates in its reverse repurchase agreements, in which the Peoples' Bank of China sell securities in order to buy them back at a higher price, to push down the Chinese yuan, and Japan continued its loose monetary policies to send the Japanese yen lower, other Asian currencies, including the Taiwan dollar, also weakened in the wake of a 1.96 percent fall in the yuan and a 3.44 percent decline in the yen against the U.S. dollar.

After an increase in forex reserves in June, Taiwan retained its title as the fourth largest forex reserves holder in the world, only trailing China's US$3.18 trillion, Japan's US$1.13 trillion and Switzerland's US$805.6 billion at the end of May, according to the central bank.

As of the end of June, the value of foreign investors' asset holdings of Taiwan-listed stocks and bonds and Taiwan dollar-denominated deposits rose from US$587.2 billion at the end of May to US$592.4 billion, central bank data showed.

Those holdings represent 105 percent of Taiwan's total foreign exchange reserves as of the end of June, up from 104 percent at the end of May, the data indicated.

Market analysts said the increases came on the back of rising share prices in the local market. In June, the Taiex, the weighted index on the Taiwan Stock Exchange, rose 297.24 points, or 1.68 percent, from a month earlier.

The central bank has said it will maintain ample forex reserves to ensure domestic financial markets remain stable and guard against any sudden movement of funds out of the country by foreign institutional investors.

 

(By Pan Tzu-yu and Frances Huang)

 

Fonte, https://focustaiwan.tw/business/202307070008

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