Central Bank governor Chang Chi-cheng defended Taiwans policy of holding a large amount of its foreign exchange reserves in U.S. Dollars citing similar policies followed by countries such as West Germany and Japan. The reserves now a record 56 billion U.S. Dlrs are the worlds largest after those of West Germany and Japan. About 90 pct is held in U.S. Dollars and the rest in yen and marks. Changs remarks to parliament were in response to a call on Monday by about 20 members of the parliament who asked the government to diversify into other currencies including yen marks and Swiss francs because of exchange rate losses. The legislators said the bank lost about 3.8 billion U.S. Dlrs between September 1985 and September 1986 as the Taiwan dollar rose to 36.77 to the U.S. Dollar from 40.45. They said they expected the losses to continue because of the rising Taiwan dollar against the U.S. Currency. Chang said the central bank could not sell the U.S. Dollars like other private banks or enterprises because such trading would be speculative and risky. The U.S. Dollar is an international currency and is widely used among trading nations he added. Chang said the Central Bank has further revised foreign exchange rules which would relax most controls or even suspend them. The revised rules have been submitted to the cabinet for approval he said. He declined to give details.
TAIWAN CENTRAL BANK DEFENDS DOLLAR RESERVES POLICY