Taipei, Nov. 6, 2009 (CENS)--Taiwan`s foreign exchange reserves hit US$341.222 billion at the end of October, a record high, showing a sharp increase of US$8.993 billion over the previous month, according to statistics released by the Central Bank of China.

Lin Sun-yuan, director of the Foreign Exchange Department of CBC, cited some reasons for the sharp increase in forex reserves, including the inflow of foreign funds, the increased value on paper of non-U.S. dollar assets in the forex reserves due to currency appreciation, and the CBC`s income from forex operation. Net inward foreign remittance reached US$2.847 billion in October.

Banking executives, though, disputed the statement, saying that massive purchase of U.S. dollars by the CBC in its market intervention is the main factor behind the sharp increase of US$9 billion in forex reserves in October, compared with average increase of US$6 billion in the previous months. Apparently, the extra US$3 billion came from purchase of U.S. dollars by the CBC in the forex market, according to them.

Faced with the influx of speculative funds into the Asian markets, the central banks of India and South Korea have also been intervening in their markets aggressively, in order to stabilize their currencies, leading to increase of US$5 billion and US$10 billion, respectively, in their forex reserves in October.

Due to the active intervention, the NT dollar devalued 1.04% against the U.S. dollar and the Korean won depreciated 0.34% in October. Banking executives noted that following the outbreak of the global financial tsunami, massive funds have fled to Asia from the U.S. and Europe, forcing the CBC to counteract the massive influx of foreign funds. Taiwan`s forex reserves have increased by US$49.51 billion so far this year, higher than the whole-year increase in any previous year.

Banking executives remarked that the CBC will continue to intervene in the market and maintain a weaker NT dollar, lest South Korea should gain a major advantage over Taiwan via sharp currency devaluation in overseas markets.

Taiwan now boasts the fourth-largest amount of forex reserves worldwide, trailing China at US$2.2726 trillion, Japan at US41.0022 trillion, and Russia at US$368.2 billion.

(by Philip Liu)