Taiwan’s central bank reportedly eases limits on dollar sales — Taipei Times

Taiwan’s central bank has eased daily limits on US dollar sales by exporters to support the New Taiwan dollar, according to foreign-exchange traders. This came after a record outflow of foreign capital from the stock market, Taipei Times reports.

Dollar sales without daily limits

Traders said the regulator informed certain banks that US dollar sales by exporters would no longer be subject to daily limits. That morning, the central bank called at least four banks, but did not specify how long the measure would remain in effect.

Exporters receive revenue in US dollars and sell it to buy New Taiwan dollars when repatriating income. Such transactions naturally support the local currency. The central bank usually limits the pace at which these proceeds are converted to prevent the currency from strengthening too rapidly.

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The regulator had previously said that, as a general rule, exporters could sell up to US$10 million per day. The restrictions were introduced last year after the New Taiwan dollar posted its biggest gain since the 1980s, to prevent panic dollar selling by exporters from intensifying the currency’s appreciation.

Foreign-exchange market reaction

The New Taiwan dollar rebounded from its weakest level since April of the previous year. At the same time, the currency ended the day down 0.35% at NT$32.592 per US dollar. Over the previous month, it lost about 2% amid persistent outflows from equities.

The reaction was more pronounced in the one-month non-deliverable forward market, which is used to hedge currency risks. Contracts strengthened by 0.4% to NT$32.535 per US dollar. Eddie Cheung, a senior strategist at Credit Agricole CIB in Hong Kong, said this could signal that authorities are less willing to tolerate currency weakness.