Taiwan’s foreign exchange reserves last month declined US$1.46 billion to US$564 billion, shrinking for two straight months, as the central bank stepped in to slow the pace of capital outflows, the central bank said yesterday.
The retreat in foreign exchange reserves had much to do with depreciations in major reserve currencies against the greenback and interventions by the central bank to support the local currency, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said.
“The foreign exchange market is volatile these days with an imbalance in supply and demand (for the US dollar and the local currency), but there is no ‘panic’ sell-off,” Tsai told an online media briefing.
Photo: Reuters
The central bank also received less income from interest last month, he added.
The ongoing capital flight is also affecting other Asian markets, explaining why Japan, South Korea and China, among other countries, also saw their currency weakening, Tsai said.
The British pound dropped 4.58 percent, the euro fell 3.82 percent, the yen shrank 2.32 percent and the Australian dollar depreciated 1.74 percent, Tsai said. The yuan softened 0.14 percent after China’s central bank announced intervention measures, he added.
The latest foreign exchange reserve data came as the central bank in a report on Wednesday said that it recorded net sales of US$880 million of US dollars to boost the NT dollar during the first six months of this year. From July last year to June this year, the bank undertook US$5.63 billion in net sales of the greenback, the report showed.
Global funds have flown to US dollar-based assets because the US economy fared better than expected and the US Federal Reserve made clear its intent to keep interest rates higher and for longer to tame inflation, Tsai said.
Capital outflows last month amounted to US$7 billion, helping to weigh on the local currency by 1.17 percent, he said.
In addition, it is common for foreign investors to practice caution ahead of holidays, Tsai said, pointing out that China is still celebrating its National Day holiday and Taiwan is close to its Double Ten National Day next week following the recent Mid-Autumn Festival.
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