Taiwan’s foreign exchange reserves were US$576.85 billion at the end of last month, a monthly decline of US$1.08 billion as the US dollar appreciated and weighed on the holdings in other major currencies ahead of the US presidential election, Central Bank Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said yesterday.
The global markets had mostly priced in the possible outcomes of the US election and would shift their focus back to economic fundamentals in the US in the absence of lingering uncertainty, such as happened in 2000, Tsai said.
Opinion polls showed that former US president Donald Trump and US Vice President Kamala Harris were locked in a tight race ahead of yesterday’s vote, but the yield rate for US government bonds rose to 4.25 percent yesterday and the US dollar index increased 3.17 percent last month, reflecting what market analysts call “Trump trade,” Tsai said.
Photo: CNA
It is widely believed that a Trump victory would bolster the US dollar and weigh on other currencies, while a Harris win could prompt a rapid retreat of the greenback.
That explained why the central bank’s positions in other major currencies took a hit after the euro weakened 3.5 percent, the Canadian dollar shed 2.92 percent, the Australian dollar lost 5.34 percent and the yen fell 7.1 percent from the previous month, Tsai said.
The New Taiwan dollar was comparably stable, with a monthly drop of 1.27 percent as foreign institutional investors increased holdings in local shares by NT$39 billion (US$1.22 billion) in the month, he said.
Securities investments and deposits held by foreign investors reached a new high of US$844.3 billion, equivalent to 146 percent of foreign exchange reserves, he said.
The investment moves came after major Taiwanese tech firms delivered strong third-quarter results on the back of avid global demand for electronics used in the development of artificial intelligence (AI) applications.
Those firms are expected to benefit further from the AI boom in the near future, even if US policy changes, which would take several months to materialize, Tsai said.
A Harris White House is expected to keep policy largely as it is, while a Trump administration could usher in stiff tariffs on exports from around the world. The US is Taiwan’s second-largest trade partner behind China.
Still, the central bank observed capital outflows in the form of capital gains and cash dividends, Tsai said.
Taiwan remained the world’s fifth-largest holder of foreign exchange reserves after China, Japan, Switzerland and India, the central bank said.
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