Forex reserves hit another new high at end-December

Taiwan's foreign exchange reserves hit a new high for the fifth consecutive month at the end of December partly due to an increase in returns from the management of its reserve portfolio, according to the central bank.

Data compiled by the central bank showed forex reserves as of the end of December totaled US$548.41 billion, up US$1.076 billion from a month earlier.

The increase in forex reserves in December helped Taiwan retain its place as the world's fifth biggest holder of forex reserves, after China's US$3.22 trillion, Japan's US$1.28 trillion, Switzerland's US$1.006 trillion, and India's US$571.4 billion.

In addition to the increase in returns from its portfolio management, a relatively weaker U.S. dollar against other major currencies also boosted Taiwan's forex reserves as the non-greenback denominated assets in the central bank's portfolio were converted into U.S. dollar terms, said Tsai Chiung-min (???), head of the bank's Foreign Exchange Department.

According to the central bank, the U.S. dollar depreciated against the Australian dollar, the British pound, the euro, Chinese yuan and Taiwan dollar by 1.55 percent, 1.25 percent, 0.35 percent, 0.11 percent and 0.36 percent, respectively, in December.

For the entire 2021, Taiwan's forex reserves rose by US$18.5 billion from the end of the previous year, lower than a year-on-year increase of US$51.8 billion in 2020, the central bank said.

Due to the smaller increase in forex reserves, Tsai said, the local forex market appeared relatively stable in 2021, compared with 2020, adding the market only saw apparent volatility in January and March of last year but the supply in and demand for the U.S. dollar during the remaining time of the year largely tilted toward a balance.

At the end of December, the value of foreign investor holdings in Taiwan's stocks and bonds and Taiwan dollar-denominated deposits totaled US$754.5 billion, up from US$718.2 billion a month earlier, the central bank said.

Those holdings represented 138 percent of Taiwan's total foreign exchange reserves as of the end of December, a new record high, and they were up 7 percentage points from the previous month, the central bank added.

Tsai said the increase in those holdings by foreign investors reflected a strong showing in the local equity market, which breached the 18,000-point mark after repeatedly hitting an intraday high in December.

Last month, the Taiex, the weighted index on the Taiwan Stock Exchange soared 791.08 points or 4.54 percent to end at 18,218.84 on Dec. 30, the last trading day of 2021.

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

Source: Focus Taiwan News Channel