Taipei--Taiwan's foreign exchange reserves hit a record high at the end of July because of a rising euro and an increase in returns on the funds managed by Taiwan's central bank, according to data released by the bank on Friday.
Taiwan's forex reserves totaled US$444.45 billion at the end of July, up US$2.51 billion from the end of the previous month.
It was the fourth consecutive month in which Taiwan's forex reserves moved higher and set a new record, the central bank data showed.
Harry Yen (???), head of the central bank's foreign exchange department, noted that the euro rose 2.7 percent against the greenback during the month, when the U.S. dollar index, which tracks the currencies of Washington's six major trading partners, fell 2.89 percent.
Yen said the strength of the euro, which is part of the central bank's forex portfolio, helped Taiwan's forex reserves grow in U.S. dollar terms after the bank converted the European currency into U.S. dollars.
In the first seven months of this year, the U.S. dollar index plunged 9.14 percent, the central bank said.
Yen said several recent U.S. economic indicators, including lower-than-expected economic growth in the United States in the second quarter, have lowered expectations of a quick rate hike by the U.S. Federal Reserve, affecting the relative value of the greenback.
In the April-June period, U.S. gross domestic product (GDP) grew 2.6 percent from a year earlier, just short of the 2.7 percent growth economists had expected.
At the same time, holdings of Taiwanese stocks and bonds by foreign investors rose US$7.7 billion in July from a month earlier to US$383.8 billion, also a new high, because of continued gains posted by Taiwan's market, the central bank said.
Those foreign-held assets accounted for 86 percent of the total forex reserves in Taiwan at the end of July, up 1 percentage point from a month earlier, the central bank said.
That meant Taiwan's foreign reserves were still adequate to cover the holdings of Taiwan assets by foreign investors, even if they have risen in recent months.
Foreign institutional investors, in fact, recorded a net fund outflow of about US$940 million in July, and Yen said the central bank's forex reserves were high enough to prevent any liquidity risks.
In the years since the government lifted a ban on foreign institutional investments in the local bourse at the end of 1990, foreign institutional investors have made US$211.84 billion in net fund inflows into Taiwan as of the end of July.
Source: Focus Taiwan News Channel