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 drop in the country's official reserves. The monetary authority announced its foreign exchange reserves stood at $597.15 billion at the end of the month.

Reserve Levels and Intervention Details

In a statement, the central bank attributed the decline in reserves to a combination of factors, including its intervention activities, investment returns, and exchange rate fluctuations. The depreciation of non-U.S. currencies held in the reserves against a stronger U.S. dollar was a significant factor.

Eugene Tsai, head of the central bank’s foreign exchange department, elaborated at a briefing in Taipei that the drop was primarily due to the bank's net selling of foreign currency. For context, the bank's statement also noted that its net foreign exchange sales in the first quarter of the year totaled $12.593 billion.

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Market Drivers and Outlook

The intervention came as the U.S. dollar strengthened following the Federal Open Market Committee’s June meeting, which Tsai said the market interpreted as being "relatively hawkish." This outlook for U.S. monetary policy increased demand for the dollar, putting pressure on other currencies.

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