Foreign reserves fall as the US dollar appreciates

• By Crystal Hsu / Staff Reporter

Taiwan’s foreign reserves stood at US$576.85 billion at the end of last month, a monthly decline of US$1.08 billion, as the US dollar appreciated and hurt holdings in other major currencies ahead of the US presidential election, the Department’s director said currency exchange of the Central Bank. – General Eugene Tsai (蔡炯民) said yesterday.

Global markets have largely priced in the possible outcome of the US election and will shift their focus back to US economic fundamentals in the absence of lingering uncertainty, as was the case in 2000, Tsai said.

Opinion polls showed former US President Donald Trump and US Vice President Kamala Harris locked in a tight race ahead of yesterday’s vote, but the yield on US government bonds rose to 4.25% yesterday and the index The US dollar rose 3.17% last month. reflecting what market analysts call the “Trump trade,” Tsai said.

Photo: CNA

A Trump victory is widely believed to strengthen the US dollar and hurt other currencies, while a Harris victory could see the greenback pull back quickly.

This explained why the central bank’s positions in other major currencies were affected after the euro weakened 3.5%, the Canadian dollar fell 2.92%, the Australian dollar lost 5.34% and the yen fell 7 .1 percent from the previous month, Tsai said.

The New Taiwan dollar was relatively flat, down 1.27 percent on the month, as foreign institutional investors increased holdings in local stocks by NT$39 billion ($1.22 billion) during the month, it said he.

Investments in securities and deposits held by foreign investors reached a new high of $844.3 billion, equivalent to 146 percent of foreign reserves, he said.

The investment moves came after major Taiwanese technology firms posted strong third-quarter results amid voracious global demand for electronics used in the development of artificial intelligence (AI) applications.

Those firms are expected to continue to benefit from the AI ​​boom in the near future, even if US policies change, which would take several months to materialize, Tsai said.

A Harris White House is expected to keep policy largely as is, while a Trump administration could impose stiff tariffs on exports around the world. The US is Taiwan’s second largest trading partner after China.

However, the central bank saw capital outflows in the form of capital gains and cash dividends, Tsai said.

Taiwan remained the world’s fifth-largest holder of foreign reserves after China, Japan, Switzerland and India, the central bank said.