Financial institutions urged to adhere to foreign exchange regulations by the country's central bank.
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In a move to keep the financial markets stable and protect exporters, the Taipei-based Central Bank has launched a crackdown on currency speculators amidst concerns over the sharp appreciation of the New Taiwan dollar (TWD).
Photo: George Tsorng, Taipei Times
Several institutions and individuals have been found parking foreign funds meant for Taiwan's securities market in TWD demand deposit accounts. This activity is believed to have stirred up volatility in the local currency market, causing potential harm to Taiwan's export sector.
The central bank's Governor Yang Chin-long previously attributed the rise in the TWD against the US dollar to market speculation but denied any connection to Taiwan-US trade talks. As the investigation unfolded, it turned out that some companies and individuals had converted foreign loans into TWD without a clear or legitimate economic use.
The Central Bank has pledged to take action against currency speculators to maintain a stable foreign exchange market. It emphasized the importance of adhering to foreign exchange rules for all transactions, with commercial banks required to follow the "real need" principle when processing foreign currency loans and TWD forward foreign exchange contracts.
This means verifying the necessity and legitimacy of each transaction to ensure that foreign capital inflows align with their declared purposes. Banks must also scrutinize large-scale NT dollar conversions, ensuring that supporting documents match the declared purpose of the transaction.
As part of the campaign, the Central Bank is targeting local and foreign custody banks for special inspections to check whether foreign institutional investors comply with rules requiring them to invest in Taiwan's markets within seven days of fund remittance.
In essence, the Central Bank is balancing market forces while maintaining order and stability. Its aim is to prevent speculative distortions that could destabilize the currency without resorting to heavy-handed market manipulation. This includes regulatory tightening, monitoring, and selective intervention to curb excess volatility and safeguard the integrity of Taiwan's financial markets.
[1] "Taiwan Central Bank Increases Inspections Amidst Currency Appreciation," Financial Times, May 5, 2025.[2] "Central Bank Taking Action Against Currency Speculators," Taipei Times, May 6, 2025.[3] "Investigations Reveal Speculative Behavior Challenging Taiwan's Exchange Market," Forbes, May 10, 2025.[4] "Exporters Worry Over Currency Appreciation's Impact on Competitiveness," The Japan Times, May 12, 2025.[5] "Curbing Volatility: Taiwan's Central Bank Navigates a Delicate Balancing Act," South China Morning Post, May 14, 2025.
- The Central Bank's crackdown on currency speculators is a response to maintain the financial market's stability, specifically addressing concerns over the New Taiwan dollar's sharp appreciation, which could potentially affect Taiwan's export sector and financial markets.
- To ensure the stability of the foreign exchange market and adhere to finance rules, the Central Bank has pledged action against currency speculators, emphasizing the importance of verifying the necessity and legitimacy of each transaction for aligning foreign capital inflows with their declared purposes.
