Taipei,Sept.17,2012(CENS)--Following the implementation of the third round of quantitative easing policy(QE3)in the U.S.,hot money has been flowing into Taiwan,jacking up the exchange rate of the NT dollar.To avoid wild fluctuation of the forex market and curb monetary speculation,the Central Bank of China(CBC)has resorted to four major measures and will carry out special forex financial inspection,when necessary.
In forex operation,the CBC has asked banks to avoid selling U.S.dollars within half an hour before the end of the trading session,in an attempt to dampen the momentum for the appreciation of the NT dollar.
The U.S.Federal Reserve Board(Fed)announced last Thursday its plan to purchase US$40 billion worth of mortgage-backed securities(MBS)per month and maintain extremely low interest rates at least until mid-2015,in order to bolster economic growth and cut unemployment rate.
The further loosening of the U.S.monetary policy has triggered influx of hot money into Asia,stimulating upward movements of both Asian stock and forex markets.Last Friday,the exchange rate of the NT dollar jumped to US$1=NT$29.375 in midsession before the intervention of the CBC,which curbed the scale of the appreciation.Eventually,the NT dollar gained NT$0.23,closing at US$1=NT$29.469,a four-month high.
In order to cope with the onset of hot money,the CBC has decided to resort to four major control measures,including notification of large-scale transactions,strict requirement for foreign funds to invest in the stock market within one week after their inward remittance,implementation of special forex financial inspection when necessary,forwarding of the list of violators to the Financial Supervisory Commission(FSC)for investigation.
Banking managers revealed that in order to lower the expectation for the appreciation of the NT dollar,the CBC will change the method for the disclosure of market information,so that market players cannot see the transaction prices and volume and grasp the direction of market movement.In addition,it has asked banks to avoid placing sell orders for the U.S.dollar after 3:30 p.m.and disturbing the market-intervention operation of the CBC.
Moreover,the CBC will stick to the six countermeasures against hot money which it adopted in the wake of QE2,including ban on inwardly remitted funds to park at NT-dollar time-deposit accounts and appropriation of 90%reserves for the parking of inwardly remitted funds at NT-dollar demand-deposit accounts.Investment of inwardly remitted funds in government bonds cannot exceed 30%of their amount.Deposits for securities borrowing are limited to the use of the U.S.dollar.
