Asian currencies fell yesterday, highlighting the pressure wrought by a stronger US dollar as the US Federal Reserve races ahead with interest rate hikes.
The New Taiwan dollar declined against the US dollar, dropping NT$0.075 to close at NT$29.790 — an almost one-month low.
The Indian rupee declined to a record low of 78.29 rupees per US dollar, while the Philippine peso dropped as much as 0.7 percent to 54.635 pesos, its weakest level since November 2005.
Photo: Reuters
The South Korean won slid to a 13-year low of 1,297.85 won versus the greenback.
In Hong Kong, the monetary authority has bought HK$78.1 billion (US$10 billion) of the local dollar so far this month, including its HK$20.8 billion purchase on Tuesday. The currency still continues to linger near the weak end of its HK$7.75 to HK$7.85 trading band against the greenback.
Regional currencies have been caught out by the Fed’s hawkish bias, which stands in contrast to the more patient policy stance adopted by Asian central banks. Idiosyncratic factors such as a widening current-account deficit for the Philippines and geopolitical risks for South Korea are adding to the pressure.
“Central bank rate signals are becoming a bigger driver of Asian currencies,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “Downward pressure on currencies where central banks are behind the curve in managing inflation will increase, particularly as the Fed keeps hiking aggressively.”
Fed Chairman Jerome Powell was scheduled to deliver his semi-annual testimony on monetary policy to the US Congress yesterday and today.
He has said that another 75 or 50 basis-point hike was likely at the next review next month.
It is not just developing Asian currencies that are feeling the heat. The Japanese yen yesterday tumbled to a fresh 24-year low of ¥136.71 per US dollar, as the Bank of Japan’s ultra-loose policy contrasts with the Fed’s hawkish bias.
“Ongoing global growth concerns, inflation worries and fears of tighter financial conditions continue to keep a leash on risk appetite,” Malayan Banking Bhd FX strategist Christopher Wong (黃經隆) said. “Those Asian ex-Japan central banks perceived to be behind the curve could further be marginalized, for instance TWD [NT dollar] and THB [Thai baht].”
Incoming Bangko Sentral ng Pilipinas governor Felipe Medalla yesterday said that the Philippine monetary authority is unlikely to raise its key rate by more than 25 basis points today.
“Most likely not,” Medalla said in a mobile phone message, when asked if a bigger rate increase is needed due to the peso’s drop.
“Of course I don’t know for sure how MBMs will vote,” he added, referring to Monetary Board members.
Jonathan Ravelas, chief market strategist at BDO Unibank Inc in Manila, said the peso might fall to a fresh record low if the Philippines opts for gradual rate hikes while the Fed tightens aggressively.
Some other policymakers are more inclined to wait. Indonesia’s central bank does not need to rush to raise interest rates unless it sees fundamental inflationary pressures, Governor Perry Warjiyo said.
Similarly, Thailand has refrained from raising borrowing costs and opted instead to cap prices of essential goods to contain inflation.
Additional reporting by staff writer
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to