All Things Newz

Taiwan lets insurers remit income to support currency-sources

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TAIPEI — Taiwan’s central bank recently agreed to allow several large life insurance companies to remit overseas investment income hoping to slow the depreciation of the local dollar, four sources with knowledge of the matter told Reuters.

The Taiwan dollar has, like other major Asian currencies, depreciated sharply in recent weeks due to aggressive rate hikes in the United States and worries over slowing economic growth.

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It has lost almost 12% so far this year against the greenback, though the currencies of two other major competitor exporters, Japan and South Korea, have weakened even more.

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The sources, speaking on condition of anonymity as they were not authorized to speak to the media, said that previously when the currency was strong there was a fear that insurers’ remittances could make it even stronger.

“But now it is a good time” to remit, said one of the sources.

Taiwan’s central bank declined immediate comment.

The sources estimated between $100-150 million could be remitted daily.

“The insurers previously wanted to remit the funds but they wouldn’t allow it,” said a second source, referring to the central bank.

A third source said that exporters were “cherishing” the U.S. dollar as they expect the Taiwan dollar to go even lower, which has led to poor U.S. dollar liquidity in the market and increased devaluation pressure on the Taiwan dollar.

“The central bank is taking timely action to agree to the return of large funds from the life insurance industry, which should slightly ease the decline of the Taiwan dollar.”

Taiwan is a major semiconductor manufacturer and has a trade dependent economy, so the depreciating currency makes its exports cheaper and more competitive.

However, Taiwan is also resource poor and relies on imports of raw materials and energy to power its economy, which the depreciation of its currency has made more expensive. (Reporting by Liang-sa Loh; Writing by Ben Blanchard; Editing by Kim Coghill)

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