The depreciation of the euro, which is one of the currencies in the Taiwanese central bank’s foreign exchange reserves’ portfolio, dragged down Taiwan’s forex reserves in November, the bank said Monday.
Citing data, the central bank said that Taiwan’s forex reserves at the end of November stood at US$434.35 billion, down US$915 million from a month earlier, marking the second consecutive month for the country’s foreign reserves to register a fall.
Before a fall in October, Taiwan’s forex reserves hit a record high for the eighth consecutive month in September.
According to the central bank, an about 3 percent fall of the euro against the U.S. dollar in November pushed down Taiwan’s forex reserves as the European currency was converted into the greenback in the central bank’s portfolio.
The central bank said that the loss in the euro’s value exceeded the returns from the central bank’s forex reserve management.
As of the end of November, foreign investors owned US$303.8 billion in local equities and bonds as well as the Taiwan deposits, accounting for about 70 percent of Taiwan’s total forex reserves.
The US$303.8 billion held by foreign investors was down about US$14.3 billion or 3 percent from a month earlier, the central bank said. Foreign institutional investors sold a net US$3.2 billion in equities in the Taiwan market in November and market analysts cited the massive equity selloff as a cause for a decline in holdings by foreign investors in Taiwan’s forex reserves.
Taiwan ranked as the fifth largest country in the world in terms of foreign reserves, after China (US$3.12 trillion as of October), Japan (US$1.18 trillion as of October), Switzerland (US$636.8 billion as of October) and Saudi Arabia (US$533.9 billion as of October), the central bank data showed.
Meanwhile, a defeat of a referendum on constitutional reforms in debt-ridden Italy pushed down the euro to an almost 20-month low against the U.S. dollar at one point Monday.
Currency dealers said that the euro’s fall and expectations of a rate hike in the U.S. market prompted traders to exit non-U.S. dollar currencies, including the Taiwan dollar, which closed at a low of NT$31.995 against the greenback since Nov. 21, when the U.S. currency closed at NT$32.000.
Harry Yen (顏輝煌), head of the local central bank’s foreign exchange department, said that the rebound staged by the euro showed that investors’ sentiments had not been as bad as the market had previously anticipated in case of a defeat of the referendum.
Despite its depreciation against the U.S. dollar, the Taiwan dollar’s value remained relatively stable, Yen said, adding that a task force in the central bank will continue to monitor the movement of the Taiwan dollar and will come up with measures to maintain its stability if necessary.
Source: Focus Taiwan News Channel