Taiwan’s central bank to discuss forex forwards
TAIPEI: Taiwan’s central bank will meet with banks on Monday to discuss their foreign exchange forward positions, banking and central bank sources said yesterday, increasing pressure to maintain fund inflows and stop the rising local currency.
Forward contracts can be used to hedge currency positions and to make speculative bets, and sources said that the move was likely to be another step by the central bank to stop the inflow of hot money that had driven up asset prices.
“It is one of the things it’s doing to contain the fund inflows and to stop hot money from coming in,” said one of the sources at a local bank.
The central bank only wanted to reiterate its view on foreign exchange speculation and would release a statement after the meeting, said a central bank official, declining to be named because the official was not authorised to speak to the media.
This is likely to be the latest move by the authority to contain rising consumer prices and prevent asset bubbles in the property and stock markets, brought about by keeping monetary policy loose to fight the economic downturn.
On Tuesday, the central bank revised upwards the rate at which banks borrow and lend to each other by 10 times the usual to an eight-month high, pushing up the overnight lending rate to 0.12%.
Most economists have said they do not expect the central bank to raise its benchmark discount rate until March or June this year, and the authority has previously said there are other ways to keep inflation in check besides raising rates.
The central bank made its latest move after the Taiwan stock, forex and bond markets closed yesterday.
The Taiwan dollar fell to T$31.98, the stock market was down 2.47%, while yields on the benchmark 10-year government bonds fell 0.15 basis points. A basis point is 0.01 percentage points.
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