Central bank reports H1 net purchase of over US$13 billion on forex market

Taipei, Oct. 22 (CNA) The Central Bank of the Republic of China (Taiwan) on Wednesday said it bought US$13 billion more U.S. dollars than it sold in the first half of this year, in order to prevent the Taiwan dollar appreciating too much.

In a report submitted to the Legislative Yuan, the central bank said it bought US$13.25 billion more greenbacks than it sold from January-June to stabilize the exchange rate with the Taiwan dollar and smooth volatility on the local foreign exchange market.

The report came out before central bank governor Yang Chin-long (楊金龍) attends a hearing held by the Legislative Yuan's finance committee on Thursday.

In the six-month period, the U.S. dollar fell 9.63 percent against the Taiwan dollar after worries over uncertainties related to the policies of U.S. President Donald Trump rose after he was worn into office in January. As a result, the U.S. dollar index, which tracks the U.S. dollar against the currencies of Washington's six major trading partners fell by 10.70 percent, according to the central bank.

The central bank said the U.S. dollar's weakness also reflected large funds moved by foreign institutional investors into the local market, which boosted the supply of greenbacks.

The losses suffered by the U.S. dollar appeared more apparent in May, when the central bank rushed to buy the greenback to cap the Taiwan dollar's appreciation, with the purchases boosting the country's foreign exchange reserves by about US$10.12 billion, the fifth largest monthly increase in history.

The central bank previously admitted the large purchase was intended to slow down the U.S. dollar's weakness in May.

Market analysts said without the central bank's intervention, the U.S. dollar would have fallen further.

However, the central bank emphasized it has adopted a two-way market intervention strategy, indicating that if the U.S. dollar rises sharply it will sell greenbacks to prevent the Taiwan dollar from falling too much.

The central bank said so far this year the U.S. dollar had fallen 6.95 percent against the Taiwan dollar as of Tuesday with foreign institutional investors tending to make net purchases on the local stock market, adding the stronger Taiwan dollar reflects the sound economic fundamentals of the country.

The central bank noted that the Taiwan dollar's fluctuations were still smaller than those of other major currencies such as the euro, the Japanese yen and the South Korean won.