The dollar rose sharply on Friday as a larger than expected spike in US inflation suggested the US Federal Reserve may not find it so easy to continue cutting interest rates.
Dealers said the latest figures showed that the Fed, like many central banks, was now caught between keeping rates high to fight inflation and the need to reduce lending costs so as to help ease a global credit crunch.
The euro dropped to US$1.4429 at 2200 GMT from US$1.4627 in New York late on Thursday.
The dollar rose strongly against the Japanese currency, hitting ¥113.23 against ¥112.15 on Thursday.
US consumer prices jumped 0.8 percent last month, the fastest pace in more than two years, and core prices, excluding volatile food and energy costs, rose 0.3 percent.
On a 12-month basis, the overall rise was 4.3 percent, the highest figure since June last year, while core inflation was 2.3 percent, the fastest since April.
`stagflation'
The latest US price figures compound concerns that the US and others could be at risk of "stagflation" -- a combination of slower growth and stubborn inflation pressures -- which puts central banks in a dilemma over whether to cut interest rates or not.
"The sharp rise in inflation globally is a serious threat to asset markets given that we are in an environment of slowing growth," said Hans Redeker at BNP Paribas.
"In fact, it signals that central banks will not be able to cut rates as freely as they might like," Redeker said.
Patrick Fearon at AG Edwards said that the dollar's gains are being fueled by the notion that economies outside the US may slow if the US economy stalls, forcing cuts in rates by other central banks.
bias
"The market is continuing to come around to our view that slowing economic growth will eventually force most of the major foreign central banks to drop their current bias toward further interest-rate hikes and maybe even cut rates," Fearon said.
"This all translates into a new outlook for relative interest rates, in which US rates are seen as unlikely to fall much further, just as foreign rates are likely to start falling in earnest," he said.
"With US rates likely to regain their competitiveness versus foreign rates, the dollar now looks like it will continue to rally in the coming months," Fearon said.
The New Taiwan dollar lost ground against the US dollar on the Taipei Foreign Exchange on Friday, declining NT$0.016 to close at NT$32.376.
A total of US$1.01 billion changed hands during the day's trading.
The NT dollar opened at NT$32.360 and fluctuated between NT$32.333 and NT$32.422.
In late New York trade, the dollar stood at 1.1525 Swiss francs after 1.1418 on Thursday.
The pound was at US$2.0177 from US$2.0408.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
United Microelectronics Corp (UMC, 聯電) forecast that its wafer shipments this quarter would grow up to 7 percent sequentially and the factory utilization rate would rise to 75 percent, indicating that customers did not alter their ordering behavior due to the US President Donald Trump’s capricious US tariff policies. However, the uncertainty about US tariffs has weighed on the chipmaker’s business visibility for the second half of this year, UMC chief financial officer Liu Chi-tung (劉啟東) said at an online earnings conference yesterday. “Although the escalating trade tensions and global tariff policies have increased uncertainty in the semiconductor industry, we have not
RSS