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 official reserves. The monetary authority's net sales of foreign currency were a key factor behind the drop, according to a statement released by the bank.

Reserves Fall Amid Dollar Strength

According to the central bank, Taiwan's foreign exchange reserves stood at $597.15 billion at the end of June. The authority cited several factors influencing the monthly change in reserves:

• Net selling of foreign exchange by the central bank.
• Returns from the investment of its reserve portfolio.
• Exchange rate fluctuations of other reserve currencies against the U.S. dollar.

For additional context, the central bank also reported that its net foreign exchange sales totaled $12.593 billion in the first quarter of the year.

U.S. Fed Policy a Key Driver

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Eugene Tsai, head of the central bank’s foreign exchange department, explained the market dynamics behind the intervention. At a briefing in Taipei, Tsai noted that the decline in reserves was driven by the bank's net selling activity and a significant depreciation in non-U.S. currencies.

Tsai attributed the U.S. dollar's strength to the market's perception of the Federal Open Market Committee’s (FOMC) June meeting as "relatively hawkish." This outlook strengthened the dollar and influenced currency selling prices in the market.

Market Outlook

Looking ahead, Tsai suggested that the Federal Reserve will likely hold interest rates steady at its September meeting, citing easing inflation and a moderating U.S. labor market. He added that if the U.S. dollar's strength eases, market participants may become more willing to sell foreign currency.