Taiwan's central bank raised its policy interest rates on Thursday to their highest level in more than 5-1/2 years to try to curb capital outflows and support the weak currency. The central bank raised its benchmark discount rate by 25.0 basis points to 3.125 percent, a bigger increase than expected by most analysts. The new rate takes effect on Friday.
It also sharply boosted its reserve requirement ratio for foreign exchange deposits to 5 percent from 0.125 percent, as part of efforts to discourage the holding of foreign exchange and prop up the sagging Taiwan dollar. "The central bank is the gatekeeper for the foreign exchange market," the bank said in a statement. "Control of the money and foreign exchange markets should be adjusted based on the environment."