Taiwan's 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 currency reserves. The monetary authority reported that reserves stood at $597.15 billion at the end of the month.

Intervention Details

According to a statement from the central bank, the change in June's forex reserves was influenced by a combination of factors, including investment returns, exchange rate fluctuations of other currencies against the U.S. dollar, and direct intervention activities.

Eugene Tsai, head of the central bank’s foreign exchange department, stated at a briefing in Taipei that the drop in reserves was a result of the bank's net selling of foreign currency. The central bank also disclosed that its net foreign exchange sales in the first quarter of the year totaled $12.593 billion.

Dollar Strength Drives Action

Ad

The intervention was prompted by a strengthening U.S. dollar, which put pressure on regional currencies. Tsai attributed the dollar's momentum to the market's perception of the U.S. Federal Open Market Committee's (FOMC) June meeting as "relatively hawkish."

This hawkish stance led to broader U.S. dollar strength and a significant depreciation in non-US currencies, compelling the central bank to act to stabilize the market, Tsai explained.

Market Outlook

Looking ahead, Tsai suggested that the Federal Reserve will likely keep interest rates unchanged at its September meeting, citing easing U.S. inflation and a moderating labor market. 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 Taiwan's exchange rate.