The fluctuation of the exchange rate of the New Taiwan dollar intensified, and the central bank offered 4 major measures to stabilize the market (Photo by reporter Chen Meiying)

[Reporter Chen Meiying/Taipei Report] The recent increase in the volatility of the international foreign exchange market and the exchange rate of the New Taiwan dollar has posed a challenge to the central bank.

Central Bank President Yang Jinlong mentioned in his speech at the 33rd meeting today that the central bank has four major measures to maintain the stability of the financial market, including the supervision mechanism on and off the market, providing liquidity in the domestic financial market, and preparing sufficient foreign currency liquidity. Approach adjustment.

Yang Jinlong said that since the beginning of this year, the volatility of global exchange rates has risen, mainly reflecting the outbreak of the Russian-Ukrainian war in the first quarter and the increased uncertainty of monetary policy in major countries; especially in September, the Fed's monetary policy stance continued to be more hawkish than market expectations, making major currencies against the US dollar. Exchange rate volatility rose further.

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In addition to the fluctuation of the exchange rate of the New Taiwan dollar rising with the fluctuation of the exchange rate of various countries, foreign investment in Taiwan stocks and remittances also aggravates the fluctuation of the exchange rate.

According to statistics from the Central Bank, in the first nine months, foreign net sales of Taiwanese stocks exceeded 1.1 trillion yuan. Together with the remittance of generous dividends, the demand for US dollars in the Taipei foreign exchange market exceeded the supply. This is the main reason for the depreciation of the New Taiwan dollar against the US dollar by more than 13% this year.

The volatility of the New Taiwan dollar rose nearly 4 percent in September.

However, the volatility of the exchange rate of the New Taiwan dollar against the US dollar is still smaller than that of major currencies such as the euro, the Japanese yen, the Korean won and the Singapore dollar, which shows that the exchange rate of the New Taiwan dollar is relatively stable under the moderate foreign exchange management of the central bank.

As for the central bank foreign exchange management?

Yang Jinlong pointed out that there are four major measures: 1. Establish an on-site and off-site supervision mechanism: use the large-value foreign exchange settlement real-time notification system and the foreign exchange receipts and payments data submitted by banks to analyze the inflow and outflow of foreign exchange funds. Immediate corrective action.

2. Provide domestic financial market liquidity: Provide liquidity in the financial system and foreign currency through measures such as money lending, foreign exchange transactions, open market operations and adjustment of deposit reserves.

3. Prepare sufficient foreign currency liquidity: The central bank, international organizations and major global financial institutions have established a foreign exchange repurchase financing mechanism (Repo), through which US dollar funds can be obtained when necessary to meet domestic US dollar liquidity needs.

4. Master the supply and demand of the foreign exchange market, and adjust the market in a timely manner: If the market supply and demand is unbalanced, resulting in excessive or disorderly fluctuations in the exchange rate of the New Taiwan Dollar, which may be detrimental to economic and financial stability, it will be based on its duties and timely adjust the market to maintain Dynamic stability of the New Taiwan dollar exchange rate.

Yang Jinlong also reiterated that the reason for foreign remittances was not due to the small rate hike in Taiwan and the widening of the interest rate gap between Taiwan and the United States.

Yang Jinlong cited the first two interest rate hike cycles of the Federal Reserve as an example. Especially from June 2004 to June 2006, the Fed raised interest rates by 17 yards. At that time, the interest rate gap between Taiwan and the United States widened, but the net inflow of foreign capital exceeded 30 billion US dollars. Instead, it showed an upward trend.

It shows that the interest rate difference is not the reason for the remittance of foreign capital, but because the U.S. technology stocks have been greatly revised this year, and the foreign capital has realized the huge book interest in Taiwan stocks and sold stocks to remit funds.

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