Forex reserves hit new high; foreign investors' holdings also reach record

Taipei, July 6 (CNA) Taiwan's foreign exchange reserves at the end of June continued to hit a new high on the back of an increase in returns from the central bank's management of its investment portfolio in the month, according to the bank.

In addition, the exchange movements of non-U.S. dollar currencies in the country's forex reserves portfolio against the greenback was also cited as the factor behind the changes at the end of last month, the central bank said.

At the end of June, the value of foreign investors' holdings of Taiwan-listed stocks and bonds, and Taiwan dollar-denominated deposits also hit a new record high in a boom of the equity market, the central bank added.

Data compiled by the central bank showed the country's forex reserves as of the end of June rose US$496 million from a month earlier to about US$573.30 billion. It was the second consecutive month for the local forex reserves to move higher, the data indicated.

In a news conference, Tsai Chiung-min (蔡炯民), head of the central bank's Foreign Exchange Department, said on Friday that the central bank jumped into the local forex market in June to slow down the pace of the Taiwan dollar's depreciation against the U.S. dollar, but the amount of market intervention was limited.

With the greenback rising against many other currencies, Tsai said, when the central bank's portfolio was converted into the U.S. dollar, the value fell accordingly, while the bank saw growing returns in its investments to offset the impact from a stronger greenback.

According to the central bank, the U.S. dollar index, which tracks the currencies of Washington's six major trading partners against the American unit, rose 1.14 percent in June.

Under such circumstances, the Japanese yen plunged 2.6 percent, the euro shed 1.16 percent, the British pound fell 0.71 percent, the Canadian dollar lost 0.34 percent, and the Australian dollar dropped 0.14 percent in June.

The Taiwan dollar also lost 0.21 percent in June, while the Chinese yuan fell 0.61 percent, the central bank said.

Compared with other currencies, Tsai said, the Taiwan dollar appeared resilient in June after volatility in April and May, so the central bank made limited efforts in intervention.

At the end of June, the holdings of Taiwan's equities, bonds and Taiwan dollar-denominated deposits by foreign investors rose to a new high of US$837.1, which represented 146 percent of the country's total forex reserves. The ratio was also at the highest level.

The previous high of US$754.5 billion was recorded at the end of December 2021, when the ratio stood at 138 percent, before trending down due to a breakout of war between Russia and Ukraine and a rate hike cycle engineered by the U.S. Federal Reserve, which sent the global financial market into a tailspin.

Tsai said the record high in holdings by foreign investors reflected a highflying stock market in June as the Taiex, the benchmark weighted index on the Taiwan Stock Exchange, topped the 23,000 point mark.

In June, the Taiex soared 1,858.03 points, or 8.77 percent, to close at 23,032.25 at the end of the month amid frenzy about artificial intelligence development stirred up by the visit by Nvidia Corp. Chairman Jensen Huang to Taiwan.

Despite the increase in forex reserves in June, Taiwan ranked as the fifth largest forex reserve holder in the world, replaced by India, which was sitting on US$574.1 billion in forex reserves, following China (US$3.23 trillion), Japan (US$1.09 trillion) and Switzerland (US$795.4 billion), according to the central bank.

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