Surging inflows spur fight to limit Taiwan dollar’s strength

Bloomberg

The intraday trading chart for Taiwan’s currency is looking more and more crazed as suspected intervention by the central bank combats pressure on the exchange rate to strengthen.
Take Tuesday. The Taiwan dollar jumped as much as 0.7% against the greenback in morning trading, before giving up all its gains at the noon-time break. Upon resuming trade it strengthened sharply again, before ending the day down 0.1%. Such “smoothing” actions, as the central bank calls them, have meant the currency is one of world’s least volatile on a closing basis in the past month, while gains are capped at around 29.6 per US dollar.
The Taiwan dollar rose as much as 0.7% on Wednesday before ending the session 0.2% stronger at 29.61, the highest since April 2018.
Late-day interventions have historically been the hallmark of central bank efforts to minimize gains in the currency and protect the island’s vital exporters.
The Taiwan dollar has climbed about 1.6% this year against the greenback, the second best performance among 31 major exchange rates after the Swiss franc.
The central bank has been “smoothing” foreign exchange markets in June, due to “huge” inflows, the central bank Governor Yang Chin-long said June 18, without giving any details as to the size or timing of operations. The central bank’s foreign exchange office didn’t immediately respond to questions when a Bloomberg reporter called.
Cash is pouring into the island at a rate barely seen in the recent years. Inflows in June reached $3.3 billion, the fourth-highest total in the past five years and the most in Asia, according to data compiled by Bloomberg. As well as Taiwanese firms bringing money home, the stronger economy and comparatively high interest rates have turned Taiwan into something of a haven for emerging-market investors.