(Bloomberg) -- Taiwan’s central bank made a rare move to reassure investors after overseas funds cut holdings of the island’s stocks and the currency weakened following the weekend’s elections.

The Taiwan dollar’s decline is due to strength in the US currency, which is leading to capital outflows, the monetary authority said in a statement late Tuesday.

“There’s no sign of panic outflows from foreign investors,” Eugene Tsai, head of the central bank’s foreign-exchange department, said by telephone after the statement was released. Foreign investors are probably taking profit on stock holdings and exiting, which is pushing down the currency, and that has nothing to do with the elections, he said.

The benchmark Taiex stock index dropped 1.1% Wednesday to post the lowest close since November. Overseas investors sold a net NT$78.2 billion ($2.5 billion) of the island’s equities, the most since March 2022, according to data compiled by Bloomberg. That was the third largest single day of outflows since 2000.

The local dollar slipped as much as 0.7% to 31.625 to the US currency, the weakest since November, during afternoon trading.

“The large outflows from the Taiwan equity market are likely due to some residual concerns following the election, as investors assess that there could be some increased tensions in the near-term,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore.

“Once things settle down and there are not further signs of increased tensions as feared, inflows should return,” he said.

Taiwan voters elected current vice president Lai Ching-te of the ruling Democratic Progressive Party as the island’s next President Saturday. The party is reviled by Beijing for its pro-independence stance.

Hawkish Comments

Wednesday’s decline in the Taiwan dollar was at least partly driven by hawkish comments made Tuesday by Federal Reserve Governor Christopher Waller. His remarks boosted the greenback and led to losses for almost all Asian currencies Wednesday. Geopolitical tensions around the world are also contributing to risk-off sentiment.

“Geopolitics, on top of market’s decreasing confidence in Fed’s easing and weak China data all led market to turn to risk-off mode and drove the foreign outflows,” said Stephen Chiu, chief Asian foreign-exchange strategist at Bloomberg Intelligence. “The Taiwan election results also influence the sentiment to some extent, though it’s hard to quantify.”

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