Taiwan’s central bank said on Tuesday it bought $3.9 billion U.S. dollars in the first half of this year, more than half what it spent in all of 2019, to intervene in the foreign exchange market to help tame a strong local currency.
The bank has been worried about the strong Taiwan dollar, which has gained 5% against the greenback so far this year, making the island’s exports more expensive and feeding concern in Taipei that Washington may label it a currency manipulator.
The bank made the comments as part of a written report to parliament ahead of the bank’s governor, Yang Chin-long, taking questions from lawmakers on Thursday.
Taiwan’s central bank purchased $5 billion U.S. dollars last year to intervene in the market, well below the roughly $12 billion that could cause the U.S. Treasury Department to label it a currency manipulator.
The Taiwan dollar is Asia’s top performing currency this year, having benefited from stronger exports from the tech powerhouse island, helped by demand for laptops and tablets to support the work-from-home trend during the COVID-19 pandemic.
The bank’s report said strong exports and Taiwanese investors repatriating their profits from overseas had helped drive the currency’s appreciation.
It said that with a small, open economy that relies on trade it was necessary to maintain a “relatively stable” rate for the Taiwan dollar, noting that its currency fluctuated less than others like the euro, yen and Korean won.
“This helps domestic financial stability and economic growth,” the bank said.
It added that it will “maintain order in the forex market” if there were to be a sudden inflow or outflow of capital.
(Reporting by Liang-sa Loh and Yimou Lee; Writing by Ben Blanchard; Editing by Tom Hogue)