Central bank mulls forex intervention after Taiwan dollar losses

Taipei, Oct. 19 (CNA) Taiwan's central bank said Monday it would step in to stabilize the local foreign exchange market if the Taiwan dollar remains volatile after its sharp decline against the U.S. dollar last week.

In a statement, the central bank said the Taiwan dollar's steep losses from Oct. 12 to 16 largely reflected a slump in the local stock market amid global financial volatility, as well as foreign institutional investors remitting funds out of Taiwan.

Last week, the Taiwan dollar fell NT$0.463 against the U.S. dollar to close at NT$32.338 on Friday, marking its steepest weekly decline in more than a year.

During the same period, the Taiex, the Taiwan Stock Exchange's benchmark index, shed 2,202.18 points, or 4.47 percent, to close at 47,111.26 on Friday, dragged down by large-cap tech stocks amid growing concerns that rising U.S. inflation, fueled by high crude oil prices, could prompt the Federal Reserve to adopt a more hawkish stance.

In addition, high valuations of AI-related stocks in Taiwan and overseas prompted investors to reassess risks in the AI industry, amid concerns that massive investments in AI infrastructure might fail to generate satisfactory returns.

During the week, foreign institutional investors recorded net sales of US$19.40 billion in shares listed on the local bourse and net fund outflows of US$17.96 billion from Taiwan.

The central bank said the local stock market had remained relatively resilient, noting that the Taiex fell 5.4 percent from Oct. 7 to 16, compared with a 15.7 percent plunge in the Philadelphia Semiconductor Index in the United States over the same period.

Despite the Taiwan dollar's losses last week, the central bank said the currency had remained stable over the longer term.

The bank will continue to closely monitor global financial markets, capital flows, and supply and demand in the foreign exchange market, and may intervene when necessary to maintain the Taiwan dollar's dynamic stability, it said.