CB Confirms 3rd Consecutive Month of FX Intervention - But Ample Reserves Remain

• The Taiwan central bank this morning confirm they have already intervened in currency markets in September, extending the run of intervention to three consecutive months.
• Confirmation comes alongside the FX reserves data released this morning (a drop to $545.5bln from $547.8bln), but the magnitude of the intervention is unlikely to unsettle investors given the USD appreciation so far this year.

Figure 1: FX intervention leaving little dent in overall reserves

• Intervention so far this year looks relatively unsuccessful if the USD/TWD rate is used as a gauge (-10%), but the TWD rate is holding up far more effectively on a NEER basis.

Figure 2: TWD far healthier on a NEER basis vs. USD/TWD spot

• As such, the head of Taiwan CB's FX department has stated that it's hard to say whether intervention will continue for the rest of September, which makes the USD/TWD a less effective gauge for judging the bank's reaction function.
• Instead, net foreign investor selling of Taiwan stocks is a more likely trigger, with regulatory caps on insurers limiting the impact on FX via widening Taiwan-US rate differentials.