The US dollar on Friday fell as further declines in the shares of Credit Suisse Group AG and First Republic Bank rattled markets fearful of contagion and increased concerns that a recession lies ahead because of the effects of tighter monetary policy.
An early recovery in European stocks ran out of steam as investor sentiment remained fragile after a week of turbulence following the failure of Silicon Valley Bank on March 10.
US banks have sought a record US$153 billion in emergency liquidity from the US Federal Reserve in the past few days, while the US$54 billion loan for Credit Suisse and US$30 billion lifeline for First Republic failed to halt their stock declines. Credit Suisse fell 8 percent in Europe and First Republic tumbled 30 percent.
The US dollar index, a measure of the dollar against six other currencies, fell 0.53 percent to 103.86, as traders waited for the Fed’s two-day policy meeting that is expected to end with a one-quarter percentage point hike in interest rates on Wednesday next week. The index fell 0.68 percent from the previous week.
Contracts for funds futures showed a 61.3 percent probability that the Fed will raise rates by 25 basis points, the CME Group’s FedWatch Tool showed.
Futures also showed that the Fed would have cut rates by July in a sign recession fears are mounting as the US central bank tightens monetary policy to fight high inflation.
Whether the banking turmoil of the past week leads to an immediate recession is hard to say, said Mazen Issa, senior foreign-exchange strategist at TD Securities in New York.
“It probably increases the probability that you do have a recession and perhaps it increases the probability that you may have a hard-landing scenario, a more severe recession dynamic,” he said.
“Once you have one regional bank go down, households question whether or not the regional banks are in trouble. That’s a natural human emotion to feel,” he said.
The New Taiwan dollar on Friday rose against the US dollar, gaining NT$0.77 to close at NT$30.554, up 0.24 percent from NT$30.848 a week earlier.
The yen fell 1.43 percent to ￥131.83 against the greenback, down 2.35 percent for the week.
Additional reporting by staff writer, with CNA
The Investment Commission yesterday approved a Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) application to invest an additional US$3.5 billion in its Arizona subsidiary to manufactured advanced chips. The world’s largest contract chipmaker’s board of directors last month approved the funding project after TSMC started moving manufacturing equipment into the fab in December last year in preparation for the production of 4-nanometer chips next year. TSMC said it has also commenced the second phase of facility construction in Arizona. The second fab is to produce semiconductors using 3-nanometer technology in 2026. Altogether, TSMC plans to spend US$40 billion on the Arizona fabs, doubling its
KEY SECTOR: Taiwan’s new chip legislation is insufficient, and a more strategic ‘chip act’ that covers the whole semiconductor ecosystem is needed, MediaTek’s chairman said MediaTek Inc (聯發科) chairman Rick Tsai (蔡明介) yesterday urged the government to formulate a state semiconductor strategy and comprehensive “chip act” that includes local chip designers and smaller-scale semiconductor companies, as they are facing intensifying competition from China. The government is playing an increasingly important role in safeguarding the local semiconductor industry’s competitiveness, given that the US, the EU and Japan are offering hefty subsidies and significant tax incentives to build semiconductor capacity domestically, as they have realized the strategic importance of semiconductors, Tsai said. To implement such a program, the government should take steps to finance a “chip act,” Tsai said
Microsoft Corp has threatened to cut off access to its Internet search data, which it licenses to rival search engines, if they do not stop using it as the basis for their own artificial intelligence (AI) chat products, people familiar with the dispute have said. The software maker licenses the data in its Bing search index — a map of the Internet that can be quickly scanned in real time — to other companies that offer Web search, such as Apollo Global Management Inc’s Yahoo and DuckDuckGo. Last month, Microsoft integrated a cousin of ChatGPT, OpenAI’s AI-powered chat technology, into Bing. Rivals
MOUNTING PRESSURE: Although bank failures in the US and Europe would not cause systemic risks, it would dampen consumers’ willingness to spend, GlobalWafers said GlobalWafers Co (環球晶圓), the world’s third-largest silicon wafer supplier, yesterday said that the financial turmoil in the US and Europe has dimmed the outlook for chip demand in the second half of this year, as growing economic uncertainty could dampen consumer spending. The Hsinchu-based wafer manufacturer said it is seeing greater pressure from economic uncertainty on the industry’s recovery, as customers would have not expected Silicon Valley Bank, Signature Bank and a tier-one bank like Credit Suisse Group SA to collapse suddenly. Although the failures are unlikely to cause systemic risks, consumers would be cautious of spending on non-essential items, such