Foreign exchange reserves dip below US$600 billion

Taiwan’s foreign exchange reserves fell below US$600 billion at the end of last month as the central bank intervened in the currency market, selling US dollars and buying New Taiwan dollars to ease volatility in the local currency.

Taiwan’s foreign exchange reserves totaled US$596.437 billion at the end of last month, down US$4.308 billion from the end of September, declining for a second consecutive month, the central bank said in a statement released on Thursday.

Investment returns and exchange rate movements involving other currencies helped support foreign exchange reserves last month, Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said.

International banknotes are pictured in an arranged photograph taken on March 24.

Photo: Reuters

Nonetheless, the NT dollar fell NT$0.626, or 1.93 percent, against the US dollar during the month amid a stock market sell-off and massive foreign fund outflows, prompting the central bank to intervene, Tsai said.

Foreign institutional investors withdrew a record net US$28 billion last month, including the repatriation of cash dividends, Tsai said, citing central bank data.

During the month, the TAIEX fell 2,728.30 points, or 5.67 percent, amid concerns over spending on artificial intelligence (AI).

The central bank remained committed to keeping Taiwan’s foreign exchange market stable, Tsai said.

He cited heavy net selling by foreign institutional investors during several trading sessions last month, including one session when net sales reached NT$300 billion (US$9.16 billion), sending the NT dollar sharply lower and prompting central bank intervention.

The central bank also received substantial interest payments from its holdings of US Treasury securities through swap transactions last month, helping offset the impact of its market intervention in the foreign exchange market, he said.

Foreign investors held US$1.743 trillion in Taiwan-listed stocks, bonds and NT dollar deposits, down from US$1.927 trillion at the end of September, central bank data showed.

The holdings were equivalent to 292 percent of Taiwan’s total foreign exchange reserves last month, compared with 321 percent a month earlier.

Analysts said the decline in foreign investors’ holdings reflected weakness in the local stock market.

The central bank has said it would maintain ample foreign exchange reserves to ensure the stability of domestic financial markets and guard against sudden capital outflows by foreign institutional investors.