TAIWAN CURBS INFLOWS OF FOREIGN EXCHANGE
  Taiwan's central bank announced that as
  from today the overseas foreign exchange borrowings of local
  and foreign banks would be frozen at the level they reached at
  the end of May.
      The central bank's statement added that the measure would
  be effective until the end of July.
      Bankers said the measure is designed to curb the inflow of
  foreign exchange and slow the growth of money supply. They
  added that the move, which sparked a record single day plunge
  of the local stock market, would limit their ability to lend
  foreign exchange to importers and exporters.
      Foreign exchange borrowings by local and foreign banks
  reached almost 12 billion U.S. Dlrs by the end of April,
  according to official statistics.
      Last week the central bank said that from today it would
  reduce its purchase of forward U.S. Dollars from banks to 40
  pct from 90 pct of the value of the contract. It said the move
  was needed because of "distortions" in the foreign exchange
  market.
      Exporters, nervous about the appreciating Taiwan dollar,
  have been heavily selling forward U.S. Dollars on the interbank
  market to avoid exchange rate losses.
      Official figures show that forward U.S. Dollar sales in May
  reached a record of almost six billion U.S. Dlrs against 5.9
  billion in April.
      All Taiwan's foreign exchange earnings must be converted
  into local dollars, boosting money supply at a time of booming
  exports. Money supply rose a seasonally adjusted 51.86 pct in
  the year to end-April, raising fears of higher inflation.
      In March the central bank clamped tight restrictions on
  remittances of foreign exchange by companies and individuals to
  Taiwan in a move to curb inflows of speculative money.
      Economists and bankers estimate that the rising value of
  the local dollar has attracted about ten billion U.S. Dlrs of
  speculative money into Taiwan since early last year. It has
  flowed in mainly from Hong Kong, Japan and the U.S..
      Since September 1985 the Taiwan dollar has risen by about
  22 pct against the U.S. Dollar.
      Bankers said the government's efforts to stabilise the
  foreign exchange market were a prelude to lifting all curbs on
  capital outflows. The central bank has said the controls will
  be dropped by the end of July or early August.
      Foreign exchange dealers said today's announcement caused
  jitters in the market with foreign and local banks making heavy
  purchases of U.S. Dollars. They said the central bank sold
  about 30 mln U.S. Dlrs.
      Taiwan's stock market plunged a record 75.53 points to
  close at 1,803.08.
  

