Several local news reports allege The Central Bank of China (CBC) has raided Citi and other unnamed custodians in Taipei, Taiwan, on suspicion of illegal currency speculation.
According to the China Economic News Service, Citi reported a massive sale of US Dollars compared to low levels of FX trading, which may be in breach of the rule instituted earlier this week that OTC non-delivery forward options could surpass no more than 20% of a firms total FX positions, down from 33% previously.
The raids which some reports said were merely inquiries into the FX currency trading practices of the custodians were carried out amid fears an appreciating currency was poised to wound the export-driven economy.
If the custodians being investigated are found to have participated in illegal speculation, the Financial Supervisory Commission, the market regulator, could revoke their rights to trade on the Taiwan Stock Exchange.
In an effort to counter foreign exchange speculation in the Republic of China, where the New Taiwan Dollar (NTD) has experienced a spike in appreciation against the US Dollar in the last several months, regulators in Taiwan have taken a number of measures recently to stabilize the currency.
Today the central bank raised the discount, secured loans and unsecured loans interest rates, and made a massive increase in the proportion of foreign investors deposits that must be kept in reserve from 9.775% to 90%, according to a Dow Jones Newswires report.
Previously in December the CBC reportedly bought up US Dollars well above market rate when signs pointed to recent-memory NTD highs, temporarily stabilizing the local currency; it also asked custodians to report large foreign fund moves so it could more easily monitor inflows and outflows.