Taiwan’s central bank said on Wednesday it will not adopt foreign exchange control measures and that foreign exchange management measures are enough to maintain financial market stability.
The Taiwan dollar has, like other major Asian currencies, depreciated sharply in recent weeks due to aggressive interest rate hikes in the United States and U.S. dollar strength as well as worries over slowing global economic growth.
It has lost 13% so far this year against the greenback, though the currencies of two other major competitor exporters, Japan and South Korea, have weakened even more.
The central bank said in a statement that while there were outflows of foreign capital from the stock market against the backdrop of U.S. rate rises and global market falls, the foreign exchange market was operating smoothly and was still stable.
Taiwan has never implemented foreign exchange controls and foreign exchange management measures are sufficient to maintain financial market stability, it added.
If another U.S. rate hike causes a large outflow of foreign capital, the bank said it has sufficient capacity to respond to fluctuations in the foreign exchange market.
“The bank will not adopt foreign exchange control measures,” it added.
The bank said it put out the statement after comments by its governor Yang Chin-long on Tuesday in parliament were misreported when he was responding to theoretical questions on tensions with China or large U.S. rate rises causing a large and sudden outflow of foreign capital.
In its statement, the bank noted Taiwan’s large foreign exchange reserves, sound balance of payments, trade surplus and very low foreign debt levels.
During previous international financial crises, for example in 1997 and 2008, the bank said it adopted flexible and effective monetary policies and foreign exchange management measures to “stabilise the market and allow Taiwan to get through the crises safely”.