Foreign capital repatriated Taiwan dollars sharply, and the central bank dumped 13 billion U.S. dollars last year.

(Photo by reporter Chen Meiying)

[Reporter Chen Meiying/Taipei Report] Foreign capital repatriation exceeded the record last year, which led to excessive demand for US dollars in the domestic foreign exchange market. The New Taiwan dollar depreciated sharply against the US dollar. billion and US$4.75 billion, totaling US$13 billion in net foreign exchange sales last year.

Last year, due to the epidemic, war, and rising inflation, the Federal Reserve violently raised interest rates, making the U.S. dollar dominant. The exchange rate of the New Taiwan dollar depreciated by 9.83%, the largest depreciation in 25 years, as foreign investors sold more than Taiwan stocks and remitted them abroad.

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The central bank pointed out that foreign capital sold more than 1.14 trillion yuan of Taiwan stocks last year, equivalent to approximately NT$39.1 billion. Together with the remittance of part of the allotted dividends, there was an excess demand for US dollars in the domestic foreign exchange market. 8.25 billion US dollars and 4.75 billion US dollars, a total of 13 billion US dollars in net foreign exchange sales by the central bank in 2022.

The central bank said that the exchange rate of the New Taiwan dollar is determined by supply and demand in the foreign exchange market in principle, but if irregular factors (such as large inflows and outflows of short-term funds) and seasonal factors lead to excessive fluctuations or disorderly changes in the exchange rate, which may be detrimental to economic and financial stability, The central bank will maintain order in the foreign exchange market in accordance with its duties.

For example, in the domestic foreign exchange market last year, due to foreign capital selling more than Taiwan stocks and remitting them abroad, there was an excess demand for US dollars. The central bank entered the market and sold foreign exchange to prevent the depreciation of the New Taiwan dollar, so as to maintain the dynamic stability of the New Taiwan dollar exchange rate.

For a long time, the volatility of the exchange rate of the New Taiwan dollar to the US dollar has been lower than that of major currencies such as the Singapore dollar, the euro, the Japanese yen, and the Korean won.

Since the beginning of this year, the U.S. dollar has fallen, and the New Taiwan dollar has risen again. According to the statistics of the central bank, from the end of last year to February 22, the New Taiwan dollar appreciated against the U.S. dollar by 0.67%, which is second only to the RMB (0.81%); , Swiss franc, euro, Japanese yen and Korean won depreciated against the US dollar by 0.07%, 0.13%, 0.31%, 0.74%, 0.93%, 2.76% and 3.10% respectively.

According to BIS data, from the end of 2022 to February 14, 2023, the New Taiwan Dollar Nominal Effective Exchange Rate Index (NEER) will increase by 0.7%, second only to the Australian dollar and British pound.

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