Central Bank governor Chang Chi-chengdefended Taiwan's 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
world's largest after those of West Germany and Japan. About 90
pct is held in U.S. Dollars and the rest in yen and marks.
    Chang's 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.
 REUTER
