Taiwan Central Bank Confirms June Forex Intervention as Reserves Decline

Taiwan's central bank confirmed it intervened in the foreign exchange market in June, an action that contributed to a decline in the country's foreign reserves to $597.15 billion. The intervention involved net selling of foreign currency to manage exchange rate fluctuations amid a strengthening U.S. dollar.

Intervention Details and Reserve Impact

According to a statement from the monetary authority, Taiwan's foreign exchange reserves stood at $597.15 billion at the end of June. The central bank cited investment gains, intervention activities, and exchange rate changes as factors affecting the total.

Eugene Tsai, head of the central bank’s foreign exchange department, attributed the decline primarily to two factors:

• The central bank’s net selling of foreign currency in the market.
• A relatively large depreciation of non-U.S. currencies against the dollar.

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For context on the scale of recent activity, the central bank also reported that its net foreign exchange sales in the first quarter totaled $12.593 billion.

Hawkish Fed Sentiment a Key Driver

Tsai explained at a briefing that the U.S. dollar's strength was a primary catalyst for the intervention. He noted that the market perceived the Federal Open Market Committee’s (FOMC) June meeting as "relatively hawkish," which bolstered the dollar and put downward pressure on other currencies.

Looking ahead, Tsai suggested the Federal Reserve will likely keep interest rates unchanged in September, citing easing inflation and a softening U.S. labor market. He added that if the dollar's strength moderates, market participants may become more willing to sell foreign currency.