Taiwan has no US dollar liquidity problems: central bank

26-Mar-2020 Intellasia | FocusTaiwan | 6:02 AM Print This Post

Yang Chin-long, governor of Taiwan’s central bank said Monday that Taiwan has no problems with US dollar liquidity, at a time when central banks around the world are seeking greenback funding through foreign exchange swap deals with the US Federal Reserve.

Questioned by Chiu Hsien-chih, a lawmaker from the opposition New Power Party (NPP), Yang said the central bank has signed forex swap deals with the Bank for International Settlements (BIS) and several other financial institutions so the supply of US dollars in Taiwan is not a problem.

Yang made the remarks when he met with the NPP legislative caucus earlier in the day, discussing US dollar liquidity in Taiwan as demand for the US currency has risen, with many investors moving their funds into greenback-denominated assets as a safe haven amid escalating concerns over the spread of COVID-19.

After Yang met Chiu, and two other NPP lawmakersWang Wan-yu and Chen Jiau-huain a closed door meeting, Chiu told reporters what the central bank governor said when asked whether it would be necessary for the local central bank to sign a US dollar swap deal with the Fed to boost greenback funding and avoid a credit crunch in Taiwan.

On March 19, the Fed signed a foreign exchange swap deal with its counterparts in nine countries including Australia, Brazil and South Korea to combat a shortage of US dollars caused by an escalation in COVID-19 contagion.

The deals with the nine countries followed similar agreements signed between the Fed and its counterparts in five countries including Canada, the United Kingdom and Japan on March 15.

According to the Fed, the swap deals, wherein the US central bank accepts other currencies in exchange for dollars, aim to reduce the strain in global US dollar funding markets and ameliorate the effects of these strains on the supply of credit to households and businesses, both at home and abroad.

According to Chiu, Yang said although the central bank has not signed a forex swap agreement with the Fed, similar deals with the BIS and other financial institutions have allowed the central bank to pledge US treasuries it owns as collateral to secure short term US dollar loans if Taiwan faces a greenback shortage.

At present, Yang said he did not see any urgent need for Taiwan to sign a forex swap deal with the Fed.

Meanwhile, making supplementary comments on Yang’s meeting with the NPP legislative caucus, an official from the central bank told CNA that Taiwan’s economy remains sound compared with other countries, and Taiwan’s greenback funding has been long term sufficient.

More important, the official said Taiwan has large forex reserves and the central bank is committed to maintaining ample reserves by improving investment returns to guarantee secure financial markets at home, even if foreign institutional investors move funds out of the country.

At the end of February, Taiwan’s forex reserves hit a new high of $479.68 billion, up $549 million from a month earlier.

At a quarterly policymaking meeting held last week, the central bank, after taking into account the impact of COVID-19, cut its growth forecast for Taiwan’s gross domestic product (GDP) in 2020 from 2.57 percent, made in December, to 1.92 percent.



Category: Taiwan

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