Accra:Taiwan's central bank announced it would intervene to stabilize the local foreign exchange market if the Taiwan dollar continues to show volatility after its significant drop against the U.S. dollar last week.

According to Focus Taiwan, the central bank attributed the Taiwan dollar's steep decline between October 12 and 16 to a downturn in the local stock market and the withdrawal of funds by foreign institutional investors. During this period, the Taiwan dollar depreciated by NT$0.463 against the U.S. dollar, closing at NT$32.338 on Friday, marking its sharpest weekly decline in over a year.

The Taiex, Taiwan's benchmark stock index, fell by 2,202.18 points, or 4.47%, to end at 47,111.26 on Friday, pressured by major tech stocks. This decline was driven by concerns over rising U.S. inflation and high crude oil prices, which might lead the Federal Reserve to take a more aggressive monetary stance. Additionally, there were apprehensions about inflated valuations of AI-related stocks, both locally and internationally, as investors weighed the risks in the AI sector, fearing that heavy investments in AI infrastructure might not yield satisfactory returns.

Foreign institutional investors were net sellers of US$19.40 billion in Taiwan's stock market and recorded net fund outflows of US$17.96 billion during the week. Despite these challenges, the central bank noted that the local stock market showed some resilience, with the Taiex dropping 5.4% from October 7 to 16, compared to a 15.7% fall in the Philadelphia Semiconductor Index in the U.S. over the same timeframe.

The central bank emphasized that, despite last week's losses, the Taiwan dollar has maintained long-term stability. It will continue monitoring global financial markets, capital flows, and foreign exchange market conditions, intervening if necessary to ensure the Taiwan dollar's stability.