Taiwan Reserves Surge Most Since 2012 on Suspected Intervention

Taiwan’s foreign-exchange reserves rose last month by the most since September 2012, a sign the central bank stepped up intervention to slow gains in its currency.

Reserves increased by $3.5 billion to $418 billion in April, the monetary authority said in a statement on Tuesday. The local dollar jumped 2.1 percent against the greenback last month, also the most since September 2012, as foreign investors pumped $3.5 billion into Taiwanese shares.

The 3 percent jump in the island’s dollar this year is the biggest in Asia and erodes the competitiveness of Taiwanese exporters against their Japanese and South Korean counterparts. The central bank will “smooth out” volatility in times of market “irregularities,” one of its officials reiterated last week.

“Large stock inflows in April caused a large increase in reserves and currency appreciation,” said Woods Chen, an economist at Ta Chong Bank Ltd. in Taipei. “If the Taiwan dollar rises too quickly in a short amount of time, the central bank will enter the market.”

Gains in the euro and other reserve currencies against the dollar, as well as returns from investments, caused the rise in reserves, the central bank said in the statement. The euro climbed 4.6 percent against the dollar in April, while Japan’s yen advanced 0.6 percent.

The central bank took the rare step of intervening during the middle of the day to weaken the local dollar on April 30, and also asked lenders to cancel currency orders shortly before noon, according to traders who asked not to be identified. The authority has sold the local dollar in the run-up to the close on most days since 2012, according to other traders.

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