Taiwan’s foreign exchange reserves rose to $601.904bn in August, returning above the $600bn mark and ending two consecutive monthly falls, Taipei Times reported on September 7.

The $7.633bn monthly gain was the largest in more than a year, according to central bank data, and came as the New Taiwan dollar (TWD) posted the strongest performance among major currencies tracked by the monetary authority. Reserves are watched closely in Taipei as a gauge of the central bank’s capacity to steady a currency exposed to heavy foreign portfolio flows into the island’s technology-dominated equity market.

Department of Foreign Exchange Director-General Eugene Tsai told a news conference at the central bank in Taipei that the increase stemmed mainly from investment returns on the bank’s foreign currency assets, the appreciation of major non-US currencies against the dollar and the bank’s intervention to keep trading orderly.

The US Dollar Index fell 0.49% during the month. The euro and the British pound each rose 0.68%, the Canadian dollar gained 0.91%, the yen advanced 0.49% and the yuan strengthened 0.35%, central bank figures showed. The New Taiwan dollar meanwhile, climbed 2.51% against the greenback as foreign investors made net inflows of about $1.2bn to pick up bargains in local equities, Tsai said.

The central bank bought US dollars and sold NT dollars to slow the greenback’s decline, he said, without disclosing the sums involved. Under a joint statement issued last year with the US Department of the Treasury, the bank publishes intervention figures quarterly.

Tsai said it was unclear whether the yen’s rise stemmed from official intervention or short-covering, noting the currency’s role as a safe-haven asset and its use in carry trades. Yen movements can affect other Asian currencies, but individual currencies would follow their own supply-and-demand conditions, he said.

Foreign investors held $1.861 trillion in Taiwan-listed stocks, bonds and NT dollar-denominated deposits at the end of August, up from $1.663 trillion at the end of July. That equalled 309% of the island’s total foreign exchange reserves, against 280% a month earlier, after the TAIEX benchmark index rose 6.98%.

Source: Intellinews