Settlements Not Restricted; Reports Are Not Policy Adjustment
Tsai Chiung-min, director general of the Central Bank's Foreign Exchange Department, said the central bank has not restricted exporters' actual sales and settlements of foreign exchange in the past, and market reports of a relaxation in daily dollar-sale quotas are not a policy adjustment. Recently, some firms reported NT dollar funding needs for salaries, bonuses and dividends at year-end and early next year and asked banks whether they could increase dollar settlements. The central bank hopes firms will stagger settlements early starting in November instead of concentrating market entry at year-end.
TAIEX Plunge and Foreign Outflows Push Rate Toward 33
The NT dollar has depreciated recently, approaching the 33整数关卡 integer level, mainly due to the TAIEX plunging by more than 1,000 points and consecutive foreign capital outflows. The market reported that exporters faced a daily dollar-sale cap of 10 tickets of 1 million US dollars each, recently relaxed sharply to stem depreciation, while some exporters held back on expectations, intensifying volatility. Tsai clarified that settlements were not restricted, and firms' inquiries mainly reflected bonus and dividend payments next year. With strong export performance, corporate dividends and bonuses next year may increase, leaving substantial future NT dollar demand.
Strong Exports Retain Dollars, Offset by Peak Tourism Season
Tsai noted that Taiwan's exports performed well this year, with exporters settling more than last year. Some firms retained US dollars as working capital or for investment needs in the United States, rather than immediately settling all export proceeds. In addition, the peak tourism season in the previous two months drove some dollar settlement demand, offsetting part of the retained funds.
Post-Election Oil Pullback, US Treasury Yield Falls to 4.8%
On the impact of the US midterm election results, Tsai observed that international oil prices fell after the election, helping ease inflation pressure. Meanwhile, AI-related stocks saw a correction, with some states restricting AI investment. As US economic growth is closely linked to AI investment, growth expectations could be revised if investment momentum slows, and the market should reassess the likelihood of further Federal Reserve rate hikes and whether monetary policy will stay hawkish. US Treasury yields have retreated from a high of 5.3% to 4.8%, and the US dollar has weakened, so one-sided bets on continued dollar strength are inadvisable.
Rate Set by Supply and Demand; Only Short-Term Imbalances Smoothed
Tsai stressed that Taiwan's economic growth performance is solid, with relatively sound balance of payments and debt balances, and the NT dollar exchange rate remains determined by market supply and demand. The central bank only smooths volatility amid short-term supply-demand imbalances and has not set a direction for the exchange rate. He urged firms with NT dollar needs to sell dollars in a timely manner, staggering settlements starting in November rather than concentrating at year-end and early next year, and not to hold back on expectations.