The Central Bank announced today that my country's foreign exchange deposits dropped to US$596.437 billion at the end of October, a monthly decrease of US$4.308 billion, falling below the US$600 billion mark. This was mainly due to the net foreign remittances of approximately US$28 billion and the central bank's entry into the market to sell foreign exchange to prevent the decline. my country's foreign exchange reserves remain the fourth largest in the world, second only to China, Japan and Switzerland.
Cai Jiongmin pointed out that factors affecting the change in foreign exchange reserves in October include investment income, changes in the exchange rates of major currencies against the US dollar, and the central bank's adjustments to maintain order in the foreign exchange market. Among them, although the U.S. dollar index rose by 0.42% in October, major currencies rose and fell. The exchange rate factor overall made a positive contribution to the bottom of foreign exchange reserves. However, the net remittances of foreign capital together with dividends and earnings that month reached 28 billion U.S. dollars. The New Taiwan dollar depreciated by 2.29% in a single month. The decrease in foreign exchange reserves was mainly caused by the central bank's entry into the market to sell foreign exchange to prevent depreciation.
In March this year, foreign capital also sold more than 900 billion yuan of Taiwanese stocks and remitted more than 25 billion U.S. dollars. Foreign exchange reserves fell sharply by 8.601 billion U.S. dollars that month, but only decreased by 4.308 billion U.S. dollars in October. Will the central bank change its "anti-depreciation" strategy?
In this regard, Cai Jiongmin emphasized, "We still have the same strategy." When there is an obvious imbalance between market supply and demand, we will enter the market to adjust. "We don't want the fluctuations to be too big."
He used the "willow theory" previously mentioned by President Yang Jinlong to explain that the central bank will not deliberately change the direction of the market, but when foreign capital oversells on a single day and huge capital movements cause an imbalance in supply and demand, it "will definitely make some adjustments" to ease exchange rate fluctuations.
As for the smaller decrease in foreign exchange reserves, Cai Jiongmin explained that in addition to market adjustments, the central bank will also adjust short-term liquidity through SWAP and other methods.
Entering November, foreign investors continued to oversell Taiwanese stocks. The exchange rate of the New Taiwan dollar fell below 32.9 yuan today, approaching the round number mark of 33 yuan. However, the central bank also observed that the Taiwan stock market fell by more than 1,600 points on November 3. Compared with the intraday fall of more than 1,600 points by Taiwan stocks on October 30, the amount of overselling by foreign investors was slightly less. Cai Jiongmin said that the decline in the stock market and the overselling of foreign capital have converged, and the central bank will continue to monitor the trends of foreign capital.
In addition, the amount of foreign exchange sold by exporters has also increased in recent days. Cai Jiongmin also reminded exporters not to blindly "expect better prices" and should re-evaluate the Fed's policy and the trend of the US dollar after the US midterm elections. He said that if the downward trend in oil prices continues, U.S. inflationary pressures may ease; and some states have tightened regulations on AI, which will slow down AI investment and slow economic growth. It is also worth watching whether the Federal Reserve still needs to maintain such a strong hawkish stance.
Regarding market rumors that the central bank has relaxed the foreign exchange selling limit for exporters, Cai Jiongmin clarified that the central bank mainly wanted manufacturers to diversify their transactions in the past. "There were no restrictions before, so there could be no relaxation."
He said that the end of the year has always been a time when exporters have a greater demand for foreign exchange settlement. This year's export performance is good, and the bonuses and benefits paid to employees by some companies next year may also increase. There will still be a demand for New Taiwan dollar funds in the future.
Recently, banks have asked on behalf of manufacturers whether they can increase the amount of foreign exchange settlement. Cai Jiongmin said that there is a clear demand, "we just said OK, no problem." It is hoped that manufacturers will start decentralized processing now and not wait until December or January next year for centralized foreign exchange settlement, which will cause greater exchange rate fluctuations.
