• Directory of Taiwan

Taiwan’s foreign exchange reserves saw a drop in July

Fluctuations of major currencies behind the rare dip in forex reserves

A currency trader watches monitors at a foreign exchange dealing room.

A currency trader watches monitors at a foreign exchange dealing room. (AP photo)

TAIPEI (Taiwan News) — In response to recent fluctuations of major world currencies against the U.S. dollar, such as the euro and Japanese yen, Taiwan saw a contraction in its foreign exchange reserves for July.

Taiwan’s Central Bank announced on Thursday (Aug. 5) that total forex reserves shrunk by NT$5.7 billion (US$206 million) last month to a total of just over NT$15.1 trillion, according to UDN.

The latest Central Bank statistics show Taiwan’s total reserves are the fifth largest in the world, following China, Japan, Switzerland, and India.

Tsai Chiung-min (蔡炯民), head of the bank's Foreign Exchange Department, said there were two primary causes for July’s contraction. The first was the use of foreign exchange reserves to generate returns on investment and the second was fluctuations in the exchange rate of major currencies against the U.S. dollar.

Tsai explained the euro, Canadian dollar and Australian dollar depreciated, whereas the Japanese yen and British pound appreciated against the U.S. dollar, which remained largely stable through July, per UDN. The statistics show the market value of foreign holdings in Taiwan stocks and bonds, and total bank deposits in New Taiwan Dollars totaled NT$19.41 trillion, representing a four-month low and a decrease of NT$483.65 billion from June.

Also, the proportion of foreign holdings in local currency assets to foreign exchange reserves fell by three percentage points to 129%, also a four-month low.

Taiwan’s Financial Supervisory Commission (FSC) announced on Thursday that foreign remittances totaled NT$97.56 billion for July, but that the FSC’s statistics were asset-based and did not include remittances of surplus profits from foreign remittances. After Taiwan Semiconductor Manufacturing Corp. and MediaTek issued dividends in July, foreign holdings also remitted dividends, the FSC explained. Therefore, the Central Bank estimates the net foreign remittance total could be as high as US$167.33 billion, per UDN.

Despite the decline in Taiwan's forex reserves in July, Taiwan still retained the fifth largest sum of reserves in the world with other East Asian countries, China, (US$89.2 trillion) and Japan (US$35.85 trillion) holding the first and second largest reserves globally, Central Bank data shows.

Updated : 2021-10-23 03:43 GMT+08:00