Yahoo Finance Taiwan’s Central Bank Has AI In Its FX Intervention Corner
(Bloomberg) -- As a strong dollar drives up currency volatility across Asia, an artificial intelligence-fueled tech boom has offered Taiwan some reprieve.
Most Read from Bloomberg
Trump Vows ‘Day One’ Executive Order Targeting Offshore Wind
China to Start $138 Billion Bond Sale on Friday to Boost Economy
Putin Names Economist as Defense Minister in Surprise Reshuffle
Global Chips Battle Intensifies With $81 Billion Subsidy Surge
The local currency weakened less than the South Korean won and Japanese yen in April, a turbulent month for the region as Federal Reserve policy bets shifted. That relative strength came even as authorities kept the amount of intervention “similar to” the previous two months, according to a central bank official.
Analysts attributed the resilience to a tech-led exports recovery that’s allowing a steady supply of the dollar, and an equities rebound driven by foreign inflows. Taiwanese stocks capped a third straight week of net inflows and the local benchmark has outperformed peers since mid-April, exchange data show.
“Taiwan doesn’t need to step up intervention like Japan due to a rebound in the electronics and semiconductor industries,” Eugene Tsai, head of the foreign-exchange department at Taiwan’s central bank, said in a press briefing last week. He added that dollar supply was “relatively stable.”
A gauge measuring swings in the Taiwan dollar over a rolling 30-day period — known as the historical volatility — trails that of the won and the yen, according to data compiled by Bloomberg.
The local currency fell 1.7% against the greenback in April, less than the won and the yen, whose slump spurred verbal warnings from authorities in Korea and suspected intervention Japan during the month. The two countries even teamed up to air concerns over their currency weakness in mid-April, while Bank Indonesia hiked rates in a surprise move to defend the rupiah.
In contrast, officials in Taiwan have refrained from sending as strong a message to the market.
Read: Korea Discusses Currency Concerns With Japan, Ramps Up Jawboning
Taiwan’s central bank “didn’t need to intervene too much because local equities performance is good,” said Ju Wang, head of greater China foreign-exchange and rates strategy at BNP Paribas SA.
In a separate note, the brokerage said a lack of financial instability and a stable FX supply due to the exports recovery have allowed the central bank to “keep a relatively hands-off stance.”
Taiwan’s exports to the US jumped 81.6% year on year to $10.2 billion in April, driven by shipments of information, communication and audio-video products.
Hon Hai Precision Industry Co., which assembles the majority of Apple Inc.’s smartphones, is among the biggest contributors to the equity benchmark Taiex index’s rebound since April 22.
Read: IPhone Maker Hon Hai’s April Sales Rise 19% in Positive Signal
Policymakers’ stance on currency, however, may shift if the dollar resumes its uptrend, or foreigners’ turn their back against the local stock market.
If Fed speakers continue to guide markets to price in later or fewer interest-rate cuts, or even a hike, then dollar strength may return and that would mean officials may still need to be active on intervention, according to Christopher Wong, a foreign-exchange strategist at Oversea-Chinese Banking Corp.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
