Chinese yuan on forex reserves portfolio
CNATAIPEI -- Taiwan has added the Chinese yuan to its foreign exchange reserves portfolio, according Perng Fai-nan, governor of the Central Bank of the Republic of China (Taiwan).
October 3, 2013, 12:11 am TWN
The central bank added the Chinese currency to its forex reserves portfolio as a reflection of China's economic strength, signified by its claim to the world's highest forex reserves of around US$3.60 trillion, Perng told the finance sub-committee of the Legislature.
The US$160 billion of annual trade and annual fund flows of US$500 billion between Taiwan and China is an indicator of the closeness of bilateral business ties, he added.
Demand for the Chinese currency has been on the rise since the island lifted its ban on yuan-denominated transactions in domestic banking units at locally operating banks, he said.
Yuan-denominated transactions kicked off under a cross-strait currency clearing system established by a memorandum of understanding between Taipei and Beijing in late August 2012.
Perng, however, declined to disclose what proportion the yuan holds in the bank's forex reserves portfolio.
At the end of August, Taiwan's forex reserves hit a record high of US$409.39 billion, up US$270 million from the end of July on the back of the central bank's investment returns.
Perng also addressed interest rates at home and abroad, saying that worldwide rates could go up if the U.S. Federal Reserve exits its monthly US$85 billion bond-buying program later this year.
His prediction, though, is that the Fed will scale down its fund injections gradually, a move which would reduce the impact on the world economy.
Taiwan's sound balance of payments will serve as a buffer against possible negative impact from the Fed's tapering, he said. In the first half of this year, Taiwan's balance of payments registered a surplus of US$6.03 billion.
The U.S. government's partial shutdown is also unlikely to have a material impact on Taiwan, he said, as Washington is unlikely to default on its debt obligations.