Taipei [Taiwan] June 26 : The world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC) on Wednesday announced that, company's financial investment arm, has decided to increase its capital by USD 10 billion, with an aim to cut foreign exchange hedging costs as Taiwanese dollar appreciates against the U.S. dollar.
According to a report in Focus Taiwan, the country's exporters have faced pressure due to the Taiwan dollar rapidly appreciating against the greenback recently. Contextually, a stronger Taiwan dollar is expected to lead to foreign exchange losses, which will erode the profitability of Taiwanese exporters.
The Taiwan dollar has shown strength and appreciated 11.5 per cent against the U.S. dollar, so far this year.
According to C.C. Wei, Chairman of TSMC, every 1 percent appreciation in the local currency reduces the company's operating margin the difference between sales and cost of goods sold and operating expenses by 0.4 percentage points.
In the month of May, the local currency soared NTD 2.088, or nearly 7 per cent, against the U.S. dollar amid market speculation that the U.S. had pressured Taiwan to allow currency appreciation as part of ongoing trade and tariff negotiations between the two sides. However, the central bank denied it, which came under pressure from Washington, reports Focus Taiwan.
In June, too, the appreciation of the Taiwan dollar continued, initially amid escalating tensions in the Middle East.
The Taiwan dollar closed at NTD 29.391 against the greenback on Tuesday, marking its highest level in more than three years. The local currency appreciated by 0.49 per cent on Tuesday, making it the strongest currency in Asia as the U.S. Federal Reserve signalled a dovish tone on monetary policy, despite a ceasefire between Israel and Iran holding.
Furthermore, the Chairman of TSMC admitted that the impact resulting from a higher Taiwan dollar has been large. He added that TSMC will work to maintain its lead over its peers in technology development and selling products at reasonable prices.
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