Taipei: The Central Bank of the Republic of China (Taiwan) announced on Wednesday that it had purchased US$13 billion more U.S. dollars than it sold in the first half of the year. This move was aimed at preventing excessive appreciation of the Taiwan dollar.
According to Focus Taiwan, the central bank submitted a report to the Legislative Yuan revealing that from January to June, it bought US$13.25 billion more U.S. dollars than it sold. The purpose was to stabilize the exchange rate of the Taiwan dollar and to mitigate volatility in the local foreign exchange market.
The report was released ahead of a hearing scheduled for Thursday, where central bank governor Yang Chin-long is set to appear before the Legislative Yuan's finance committee. During the first six months, the U.S. dollar depreciated by 9.63 percent against the Taiwan dollar, influenced by concerns over policies introduced by U.S. President Donald Trump following his inauguration in January. This depreciation also caused the U.S. dollar index to drop by 10.70 percent, as recorded by the central bank.
The central bank attributed the U.S. dollar's weakness to significant capital inflows from foreign institutional investors into the local market, which increased the supply of U.S. dollars. These losses became more pronounced in May, leading the central bank to purchase the U.S. dollar aggressively to curb the Taiwan dollar's appreciation. This intervention resulted in a US$10.12 billion rise in the country's foreign exchange reserves, marking the fifth largest monthly increase historically.
The central bank had previously acknowledged that its large-scale purchases were intended to moderate the U.S. dollar's depreciation in May. Market analysts suggested that without the central bank's actions, the U.S. dollar would have experienced further declines.
Despite the interventions, the central bank maintained a two-way market strategy, indicating readiness to sell U.S. dollars if the currency appreciated sharply to prevent excessive depreciation of the Taiwan dollar. As of Tuesday, the U.S. dollar had decreased by 6.95 percent against the Taiwan dollar for the year, with foreign institutional investors generally making net purchases in the local stock market. This appreciation of the Taiwan dollar was seen as a reflection of the country's sound economic fundamentals.
The central bank also highlighted that the fluctuations of the Taiwan dollar were less pronounced compared to other major currencies, including the euro, Japanese yen, and South Korean won.