Taiwan’s foreign exchange reserves at the end of November showed the biggest net month-on-month increase in almost two years, in part because of central bank intervention to limit the Taiwan dollar’s appreciation against the U.S. dollar.
Taiwan’s forex reserves as of the end of November hit a record high of US$552.20 billion, up about US$9.41 billion or 1.7 percent from a month earlier, the largest month-on-month increase since an increase of US$11.5 billion in January 2021, according to the bank.
Some of the gains were generated by higher returns on the bank’s portfolio, but the biggest factor was by the bank’s purchase of U.S. dollars to moderate the Taiwan dollar’s rise amid heavy inflows of foreign funds, said Tsai Chiung-min (???), head of the central bank’s Foreign Exchange Department.
“The central bank’s intervention has been aimed at maintaining market order,” Tsai said, at a time when the local currency was turning stronger against the U.S. dollar, reversing its weakness over the past few months.
In November, the U.S. dollar weakened more than 4 percent, falling from NT$32.210 at the end of October to NT$30.902 on Nov. 30.
Prior to November, the greenback had soared more than 16 percent against the Taiwan dollar in the year to date as the U.S. Federal Reserve launched aggressive interest rate hikes to combat high inflation.
Tsai said the Taiwan dollar’s renewed momentum in November came as the Fed struck a softer tone in tightening, prompting the markets at home and abroad to anticipate slower increases in interest rates.
Tsai said markets worldwide are now largely expecting the Fed to raise rates by 50 basis points in December instead of 75, which has led to large fund inflows into the region, pushing down the U.S. dollar.
The value of foreign investor holdings of Taiwan-listed stocks and bonds and Taiwan dollar-denominated deposits rose by US$103.0 billion (25 percent) in November from a month earlier to US$514.8 billion due to a rebound in share prices in Taiwan, the central bank said.
Those holdings represented 93 percent of Taiwan’s total foreign exchange reserves, 17 percentage points higher than at the end of October, the central bank said.
In November, the Taiex, the Taiwan Stock Exchange’s benchmark weighted index, surged 14.9 percent as foreign institutional investors resumed buying.
The central bank has said it would maintain ample forex reserves to keep domestic financial markets stable and guard against any sudden movement of funds out of the country by foreign institutional investors.
Source: Focus Taiwan News Channel