Taipei:Foreign institutional investors have withdrawn approximately US$10 billion from Taiwan since the beginning of November, which has contributed to the downward pressure on the Taiwan dollar against the U.S. dollar, Central Bank Governor Yang Chin-long stated.

According to Focus Taiwan, these outflows include stock market profits and dividends received by foreign investors, which Yang characterized as normal business activity. He explained that foreign institutional investors frequently shift funds between markets.

On Monday, the Taiex, Taiwan's benchmark stock index, experienced its second-largest single-day point gain, increasing by 1,960.06 points. Despite this stock market rally, the Taiwan dollar weakened, depreciating by NT$0.114 against the U.S. dollar to close at NT$32.882. This depreciation occurred amid continued selling of Taiwanese shares by foreign institutional investors, who sold a net NT$90.06 billion worth of shares on Monday, marking their eighth consecutive session of net selling.

The cumulative net sales by foreign institutional investors over the eight sessions amounted to nearly NT$800 billion. This selling was driven by market volatility associated with concerns about the development of artificial intelligence (AI).

Before Monday's trading, the Taiwan dollar had depreciated by 1.20 percent against the U.S. dollar since the start of November, with the U.S. dollar briefly exceeding NT$33, prompting intervention by the central bank. In October, the Taiwan dollar fell by 1.93 percent against the U.S. dollar as net fund outflows by foreign institutional investors reached approximately US$28 billion.

Yang mentioned that the exchange rate of the Taiwan dollar is determined by market supply and demand, making future movements difficult to predict. The central bank's foreign exchange reserves decreased to US$596.44 billion at the end of October, down US$4.31 billion from the previous month, due to market intervention.

The central bank has committed to maintaining sufficient foreign exchange reserves to stabilize Taiwan's financial markets and protect against sudden capital outflows while attempting to mitigate volatility in the foreign exchange market. However, market experts caution that the central bank could face challenges in stabilizing the Taiwan dollar if foreign institutional investors persist in moving funds out of the country, given their substantial holdings of Taiwan dollar-denominated assets and the high cost of market intervention.