Taiwan’s foreign exchange reserves hit a record high at the end of January after increasing for the sixth consecutive month, the Central Bank of the Republic of China said Wednesday.

Data compiled by the central bank showed that the country’s forex reserves as of the end of January had risen by US$466 million from a month earlier to another new high of US$548.87 billion.

The increase in forex reserves helped Taiwan retain the status as the fifth-largest forex reserves holder in the world, trailing only China (US$3.22 trillion), Japan (US$1.26 trillion), Switzerland (US$1.02 trillion), and India (US$566.1 billion).

At a news conference, Tsai Chiung-min (???), head of the bank’s Foreign Exchange Department, said the continued growth in forex reserves partly reflected an increase in returns from the management of its reserve portfolio.

In addition, Tsai said the exchange rate fluctuations of other reserve currencies against the U.S. dollar in the central bank’s investment portfolio also contributed to the increase in forex reserves.

At the end of January, the value of foreign investor asset holdings in Taiwan-listed stocks and bonds and Taiwan dollar-denominated deposits totaled US$735.7 billion, down from US$754.5 billion a month earlier, the central bank said.

Those holdings represented 134 percent of Taiwan’s total foreign exchange reserves as of the end of January, down down 4 percentage points from the previous month, the central bank added.

Commenting on the fall in the foreign investor asset holdings at the end of January, Tsai said foreign institutional investors registered net fund outflows of US$1.828 billion in January.

However, Tsai said demand and supply in the local forex market still tilted toward a balance and had remained stable over the month.

Meanwhile, Tsai said the Taiwan dollar stayed strong against the U.S. dollar in the past two years, attributing the strength of the local currency to the country’s strong export performance.

Tsai added that a stronger Taiwan dollar also came after many Taiwanese exporters sitting on large funds rushed to sell U.S.-dollar holdings in exchange for the Taiwan dollar.

Taiwan enjoyed a record-high trade surplus with the United States of US$40.2 billion last year, and Tsai said the high trade surplus simply reflected strong demand from the U.S., rejecting accusations that the central bank engaged in currency manipulation in order to obtain a trade advantage.

The central bank has said it would maintain ample forex reserves to ensure that domestic financial markets remain stable as well as to guard against any sudden withdrawal of funds out of the country by foreign institutional investors.

Source: Focus Taiwan News Channel