Taiwan Central Bank Confirms June Forex Intervention as Reserves Decline

Taiwan’s central bank confirmed it intervened in the foreign exchange market in June, contributing to a decline in the country's foreign exchange reserves. The monetary authority reported that reserves stood at $597.15 billion at the end of the month.

Details of the Intervention

In a statement, the central bank cited its intervention activities, alongside investment gains and exchange rate fluctuations against the U.S. dollar, as the primary factors affecting the June reserve levels. The authority also noted that its net foreign exchange sales in the first quarter of the year totaled $12.593 billion.

Eugene Tsai, head of the central bank’s foreign exchange department, elaborated on the June decline at a briefing in Taipei. He attributed the drop to two main causes: the central bank's net selling of foreign currency and a significant depreciation of non-U.S. currencies.

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Market Drivers and Context

The strengthening of the U.S. dollar was a key driver behind the market dynamics, according to Tsai. He explained that market participants viewed the Federal Reserve's June meeting as relatively hawkish, which bolstered the dollar and influenced foreign exchange selling prices.

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