TAIPEI (Taiwan News) — Taiwan’s Central Bank prioritizes price stability over export competitiveness when intervening in foreign exchange markets, Deputy Governor Yen Tzung-ta (嚴宗大) said Monday.
Yen told legislators that the bank's actions in maintaining exchange rate stability can help ease imported inflation pressures linked to the Iran conflict, which has driven up global oil prices, per CNA.
According to a Central Bank report, the ongoing conflict has pushed up international commodity prices, including crude oil, leading to higher import costs for Taiwan. However, Yen said imported inflation remains manageable.
DPP Legislator Kuo Kuo-wen (郭國文) noted that the Taiwan dollar is facing depreciation pressure, which could worsen imported inflation, according to CNA. He asked whether the bank would consider restricting foreign investors from immediately repatriating funds after selling Taiwanese stocks to help stabilize the currency.
Yen said implementing such a measure would pose challenges due to the unrestricted flow of capital. He added that the Central Bank already requires foreign investors to keep funds in the stock market if they do not repatriate them immediately after selling shares, per CNA.
He reiterated that the primary goal of exchange rate stabilization is to control inflation, rather than enhance export competitiveness. Yen said the bank will continue monitoring developments in the Middle East and track economic and financial data closely to implement appropriate monetary policies as needed.
Yen confirmed that the bank has not yet decided on the potential use of foreign exchange reserves for investments in the US. He emphasized that the bank manages reserves, and their size largely depends on market interventions and supply and demand conditions.
KMT Legislator Lai Shyh-bao (賴士葆) raised concerns about recent financial market volatility and whether reserve allocations had changed significantly. Yen said the Central Bank’s holdings remain heavily weighted toward US dollar-denominated assets, accounting for nearly 80%, per CNA.
Lai noted that Taiwan holds one of the world’s largest amounts of US dollar assets. Yen acknowledged the high concentration but said there are currently no plans to diversify reserves into gold or cryptocurrencies.
Lai also asked about the cooling housing market and whether the bank would ease its seventh wave of credit controls. Yen said minor adjustments were made in September, and the bank’s board reviews policies at each meeting, with another internal review expected at the next meeting.
