Taiwan's forex reserves hit another new high in January

Taipei, Feb. 3 (CNA) In the wake of a weakening U.S. dollar, Taiwan's foreign exchange reserves at the end of January hit a new high after converting assets denominated in non-greenbacks in the central bank's portfolio into the American currency, the central bank said Friday.

Data compiled by the central bank showed that the country's forex reserves rose US$2.21 billion from a month earlier to US$557.14 billion as of the end of January, marking the third consecutive month the forex reserves have hit a record high.

January also marked the fourth straight month Taiwan's forex reserves have moved higher month-on-month, the central bank said.

In addition to a depreciating U.S. dollar, Taiwan's forex reserves also saw an increase in returns from the management of the central bank's portfolios from a month earlier, according to the bank.

After an increase in January, Taiwan has cemented its status as having the fourth largest forex reserves in the world, behind China (US$3.13 trillion), Japan (US$1.1 trillion) and Switzerland (US$849.9 billion).

Speaking with reporters, Tsai Chiung-min (蔡炯民), head of the central bank's Foreign Exchange Department, said the U.S. dollar index, which tracks the value of the greenback against the currencies of Washington's six major trading partners, fell 1.38 percent in January, which led non-greenback currencies such as the euro, the British pound, the Chinese yuan and the Japanese yen to appreciate.

When the central bank calculated its portfolio in forex reserves in U.S. dollar terms, the value of the assets moved to a new high at the end of January, accordingly, Tsai said.

Tsai said the weakness of the U.S. dollar index came after market sentiment improved at a time when markets at home and abroad expect the Federal Reserve to turn dovish in its rate hike cycle, and many investors even anticipate the American central bank will start to cut interest rates at the end of this year, sending the greenback and U.S. treasury yields lower.

As of the end of January, the value of foreign investors' asset holdings of Taiwan-listed stocks and bonds and Taiwan dollar-denominated deposits rose from US$459.6 billion at the end of December to US$551.7 billion, central bank data showed.

Those holdings represent 99 percent of Taiwan's total foreign exchange reserves, up from 83 percent at the end of December, the data indicated.

Tsai said the increase in the value of foreign investors' asset holdings largely resulted from a significant rebound by the local stock market in the month amid massive buying by foreign institutional investors.

In January, the Taiex, the weighted index on the Taiwan Stock Exchange, rose 1,127.51 points, or 7.98 percent, to 15,265.20.

According to the Financial Supervisory Commission (FSC), the top financial regular in Taiwan, foreign institutional investors recorded net fund inflows of US$7.56 billion, or about NT$227 billion, into the local market, the second largest net inflow since 2011.

The FSC said foreign institutional investors bought a net NT$212.06 billion worth of shares on the local main board and the over-the-counter market in January.

The bank has said it will maintain ample forex reserves to ensure that domestic financial markets remain stable and to guard against any sudden movement of funds out of the country by foreign institutional investors.