Taiwan central bank asks major exporters to spread out forex sales - sources

Even though exports in 2020 hit a record high by value, the currency's strength has vexed the government as it risks making shipments from its manufacturing economy less competitive

  
A staff member stands beside the Taiwanese Central Bank logo in Taipei, Taiwan February 26, 2018.

A staff member stands beside the Taiwanese Central Bank logo in Taipei, Taiwan February 26, 2018.

REUTERS/Tyrone Siu

TAIPEI  - Taiwan's central bank began meeting this week with major exporters to ask them to spread out sales of foreign currency, four sources with direct knowledge of the matter told Reuters, as it continues to try to rein in the soaring local currency.

The Taiwan dollar's 5.6% gain against the greenback last year was among the strongest in Asia and its rise extended it to a fresh 23-1/2-year high of 27.938 per dollar on Wednesday. It is up nearly 2% this year.

Even though exports in 2020 hit a record high by value, the currency's strength has vexed the government as it risks making shipments from its manufacturing economy less competitive.

At the same time, the authorities are wary of intervening too heavily in the foreign exchange market and being labelled a currency manipulator by the United States, the most important backer of the Chinese-claimed island.

Last month, the U.S. Treasury added Taiwan to a "monitoring list" of countries whose currency practices had caused concern, the first time the island has appeared on the list since 2017. 

The sources told Reuters that the central bank had invited senior executives at major exporters to ask them to help ensure stability in the foreign exchange market by spreading out their sales of foreign currency.

"Spreading out forex sales has been the central bank's principle for many years now," said one of the sources, who like the others spoke on condition of anonymity as they were not authorised to speak to the media.

The central bank did not respond to a request for comment.

The central bank has been trying to exercise "moral persuasion" with traders and bankers, rather than laying down any new rules to control the Taiwan dollar's rise. 

The sources said the central bank had talked to about 20 exporters, including Apple Inc supplier Foxconn and consumer electronics producer Lite-On Technology Corp.

Neither Foxconn nor Lite-On immediately responded to a request for comment.

In a Facebook post on Tuesday, the central bank said that a stable foreign exchange rate was good for everyone.

Taiwan's trade-dependent economy has rebounded strongly from the impact of the COVID-19 pandemic, benefiting from global demand for its tech goods as the outbreak forces millions to work and study from home around the world.

The island's exports in 2020 rose 4.9% to $345.28 billion. 

(Reporting by Liang-sa Loh; Additional reporting by Yimou Lee, and Tom Westbrook in Singapore; Writing by Ben Blanchard; Editing by Jacqueline Wong) ((ben.blanchard@thomsonreuters.com;))

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