Taiwan denies using swaps to intervene in currency market

TAIPEI (Reuters) – Taiwan’s central bank has never used swaps to intervene in the currency market, a senior central bank official told Reuters on Tuesday, after the U.S. Treasury Department cited an analyst report suggesting the island was doing so.

The U.S. Treasury, as part of its semiannual report on foreign exchange policies of major U.S. trading partners, said it was “concerned” by recent analysis from the U.S. Council of Foreign Relations “suggesting that Taiwan may have engaged in substantial undisclosed foreign exchange intervention in the swap market”.

The report said the analysis estimated Taiwan has conducted “undisclosed foreign exchange intervention in the swap market totaling approximately $130 billion, and perhaps as much as $200 billion”.

The senior Taiwan central bank official, speaking on condition of anonymity, denied that swap market intervention took place.

The Treasury report also said that Taiwan, along with Thailand, were close to triggering thresholds to be added to the currency monitoring list.

A second Taiwan central bank official told Reuters that they have “smooth communication channels” with the United States, and would continue to the dialog with them.

Two sources told Reuters in November that Taiwan’s central bank and Ministry of Economic Affairs had set up a group to coordinate stepped up purchases of U.S. goods, as its seeks to reduce its trade surplus and head off being labeled a currency manipulator.

Taiwan was last labeled a currency manipulator by the United States in December 1992 and was later put on the U.S. Treasury monitoring list in 2016 and 2017.

Taiwan’s trade surplus with the United States for the January to November period of last year already exceeded $20 billion, meeting one of the criteria Washington uses for putting trade partner nations on the monitoring list.

(Reporting by Liang-sa Loh, writing by Ben Blanchard; Editing by Himani Sarkar & Shri Navaratnam)

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