Foreign Exchange Market Pressure Widened in Two Stages
According to the latest report from the central bank, as of October 21 this year, cumulative net outflow of foreign capital reached USD 77.6 billion, of which USD 54.3 billion occurred from July to October 21, more than double the USD 23.3 billion in the first half. Central bank Governor 楊金龍 is scheduled to deliver a business report to the Finance Committee of the Legislative Yuan on the 28th. Facing supply-demand imbalance in the foreign exchange market, the central bank conducted net foreign exchange sales of USD 17.04 billion in the first half, equivalent to about NT$540 billion, but the NT dollar has still depreciated 3.23% against the US dollar so far this year, briefly falling below 32.6 recently.
USD 17.04 Billion in Foreign Exchange Sales in First Half for Market Adjustment
In the first half, the US dollar index rose 2.91%, while foreign investors oversold Taiwan stocks by NT$8374 billion, equivalent to about USD 26.1 billion, and together with remitted funds such as distributed dividends, net foreign capital outflow reached USD 23.3 billion, with the NT dollar depreciating 1.25% against the US dollar. As foreign investors sold stocks and remitted funds abroad, excess demand for US dollars emerged in the foreign exchange market, prompting the central bank to intervene, with cumulative net sales of USD 17.04 billion, equivalent to 1.62% of gross domestic product, but still failing to reverse the depreciation trend. During the same period, Taiwan stocks surged 59.25% in the first half, showing divergent stock and foreign exchange trends.
Net Outflow of USD 54.3 Billion in Second Half
From July 1 to October 21, foreign investors oversold Taiwan stocks by NT$1 trillion 2488 billion, equivalent to about USD 38.7 billion, with net remitted outflows reaching USD 54.3 billion, during which the NT dollar depreciated 2% against the US dollar, while Taiwan stocks rose only 1.65% over the same period. The central bank explained that in addition to selling stocks, foreign investors also remitted funds such as distributed dividends, so the net outflow scale does not fully correspond to the oversold amount. The central bank analyzed that in the second half, renewed escalation of the Middle East conflict and geopolitical risks boosted safe-haven demand, global AI and semiconductor stocks faced large-scale selling pressure, Taiwan stocks were hit more明显 because of their higher weighting in technology stocks, coupled with hawkish signals from Federal Reserve Chair 華許 at the global central bank annual meeting, and the higher-than-expected US September consumer price index, rising market expectations for a year-end rate hike by the Federal Reserve further supported the US dollar trend.
Foreign exchange reserves stood at USD 600.745 billion at the end of September, down USD 1.808 billion from the end of last year, mainly reflecting intervention to maintain order in the foreign exchange market, but the decline in reserves cannot be directly regarded as actual intervention spending, nor can the net sales of USD 17.04 billion in the first half be directly extrapolated to the full-year scale, and the adjustment amount for the second half was not disclosed this time. As of October 21, the US dollar index has risen 3.49% so far this year, the NT dollar has depreciated 3.23%, while the Swiss franc depreciated 3.89%, the euro 4.35%, and the Thai baht 6.29% over the same period. The central bank stressed that Taiwan is a small open economy with high trade dependence and a relatively small foreign exchange market, where 大量 inflows and outflows of short-term funds can easily amplify volatility, exchange rates are in principle determined by supply and demand, and it will adjust in a timely manner if excessive volatility or disorder occurs, while over the long term volatility of the NT dollar against the US dollar is lower than that of the euro, Korean won and Japanese yen, helping corporate quotations, financial stability and economic growth.