(C) Reuters. A man is seen reflected next of the Taiwan’s Central Bank logo in Taipei

TAIPEI (Reuters) – Taiwan’s central bank is investigating the actions of five foreign banks for their involvement in some $8 billion in net trading positions on the deliverable forwards market, four sources with knowledge of the situation told Reuters.

The central bank on Tuesday met the banks to discuss the situation with them, the sources said, speaking on condition of anonymity as they were not authorised to speak to the media.

The banks had been engaged by grains firms to trade dollars in the offshore non-deliverable forwards (NDF) market where they would get a better exchange rate than they would at home, the sources said.

The sources declined to identify the banks or the grains firms. The central bank did not respond to a request for comment.

Taiwan does not permit onshore trading of NDFs, but companies can still engage in this via foreign banks’ overseas branches.

The sources said the size of the trades could have an impact on the Taiwan dollar exchange rate at a time when the central bank is already worried about the local currency’s strength.

The Taiwan dollar has continued to strengthen against the U.S. dollar, and the relatively large gap between the overseas non-deliverable forward market for the greenback and the deliverable forward market for the Taiwan dollar has created arbitrage opportunities, as they get a more favourable rate overseas.

The Taiwan dollar has appreciated 2.4% against the greenback so far this year, worrying the government in the export reliant economy. Taipei is also wary about being labelled a currency manipulator by the United States.