Taiwan's foreign exchange reserves continued to rise in October, reaching a new record high of US$341.222 billion at the end of the month, the Central Bank of the Republic of China announced Nov. 5. The figure represents an increase of US$8.993 billion over that at the end of September, marking the fourth largest monthly rise in Taiwan's track record, according to the central bank's tallies, Economic Daily News reported on Friday. Lin Sun-yuan, director-general of the bank's department of foreign exchange, said major factors behind the increase included the foreign capital inflow and earnings stemming from adept foreign exchange management. Given appreciation in the euro, the British pound and other major currencies, forex reserves denominated in these currencies were worth more in terms of the base unit, the US dollar, he added. However, local bank executives said they think the main reason for the steep rise in foreign exchange reserves was the central bank's intervention to prevent an appreciation of the local currency - the New Taiwan dollar. It was noted that Taiwan's forex reserves have increased by an average of about US$6 billion per month since March. Sources said about US$3 billion of the nearly US$9 billion increase in Taiwan's foreign exchange reserves in October was the result of central bank intervention in currency markets, with the figure corresponding roughly to the US$2.847 billion net inflow of foreign capital for the month as recently announced by the Executive Yuan's Financial Supervisory Commission. With the central bank's intervention, the NT dollar depreciated by 1.04 percent against the greenback in October, while the South Korean won slid by 0.34 percent against the US dollar during the same period. Local bank executives noted that following the global financial tsunami, there has been a major flight of capital away from the United States and Europe. Taiwan's forex reserves have increased by US$49.51 billion so far in 2009, already surpassing the nation's single-year record and forcing the central government to act, they said. Pointing out that Taiwan's economy is open and export-oriented and that the South Korean central bank has also been actively working to prevent an appreciation of the won, bank dealers said that Taiwan's central bank of course could not let the local currency balloon in value. It has had to move to buy up US dollars in an all-out effort to deter foreign currency speculators from betting on an appreciation of the NT dollar. They added that the central bank's policy will not change in the short term. Currently, Taiwan ranks fourth in the world in terms of forex reserves. Mainland China tops the list at US$2.28 trillion, followed by Japan at just over US$1 trillion, and Russia at US$368.2 billion. All three countries' forex reserves have continued to rise this year, largely due to foreign capital influx and the central banks' policies of intervening to prevent steep appreciations in their respective currencies.
