Asian foreign exchange reserves fall: S&P

• By Chen Cheng-hui / Staff Reporter

Declining current account balances and rising capital outflows have led to a decline in foreign exchange reserve positions in emerging Asia, S&P Global Ratings said yesterday.

“Foreign exchange reserve levels remain generally reasonable,” Louis Kuijs, S&P Global Ratings’ chief economist for Asia Pacific, said in a statement. “But global uncertainty and prospects for even higher global interest rates call for a review of the underlying dynamics.”

Kuijs made the comments after the rating agency released a report titled Foreign Reserves In Asia’s Emerging Markets Are Stressed.

As Russia’s invasion of Ukraine continues and inflationary pressures mount around the world, major central banks are raising interest rates on an unprecedented scale, which has fueled global economic and financial turmoil so far this year, S&P said.

The rapidly changing situation is forcing financial markets to pay more attention to international trade and capital flow dynamics in emerging markets, it said.

In particular, high energy and commodity prices are weighing on current account balances in net energy and commodity importing countries, while higher US interest rates are causing capital outflows, she added.

“These developments put devaluation pressure on currencies and could endanger financial stability,” said Kuijs.

Taiwan’s foreign exchange reserves shrank by $1.15 billion to $547.81 billion last month, the second-lowest level this year due to continued foreign capital outflows, the central bank reported Aug. 5.

The country’s current account surplus fell by $2.99 ​​billion year-on-year to $26.55 billion in the most recent quarter, the lowest in five quarters, while the financial balance sheet showed net outflows of $24.36 billion in the second quarter of the year -Dollar reported making the 48th straight quarter of outflows, the central bank reported on Friday.

The new Taiwan dollar closed 0.25 percent lower against the US dollar at NT$30.095 yesterday, hitting its lowest level in 28 months, central bank data showed.

So far this year, the NT dollar has depreciated about 8 percent against the greenback, data showed.

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