TWD 23 oct

17:04 23Oct2008 RTRS-Taiwan dlr hits 17-month low on stocks, US dlr buying

(Updates to close)
TAIPEI, Oct 23 (Reuters) - The Taiwan dollar fell on Thursday to a 17-month closing low, as domestic stocks slid and investors bought U.S. dollars, despite central bank intervention and exporter purchases of the local currency.
The Taiwan dollar dipped as low as T$33.408 against the U.S. dollar during intra-day trade but recouped some losses to close at T$33.296, its lowest finish since May 24, 2007. The Taiwan dollar ended at T$32.990 a day earlier.
Volume on the main Taipei Forex Inc was active at $1.613 billion, rising from Wednesday's $1.126 billion
"The Taiwan dollar tracked losses in the stock market," said a dealer at a local bank. "Foreign banks were buying the U.S. dollar during trading."
Taiwan stocks closed down 2.72 percent on Thursday at a fresh five-year closing low, with investors offloading shares across the board a day after the government said it would lower the 2009 economic growth forecast.
Foreign institutions sold Taiwan stocks for a sixth session, unloading T$428 million ($12.9 million) on Thursday. Foreign investors have sold about T$433 billion so far since June.
However, central bank intervention during late trading helped limit the Taiwan dollar's fall.
"How low the local currency will fall depends on the central bank," the dealer said.
As most other Asian currencies fall, the central bank is unlikely to let the Taiwan dollar buck that trend, another dealer in Taipei said.
"The central bank will keep the Taiwan dollar weak to help exports," he said.
Exporters also bought the Taiwan dollar throughout the day, giving the local currency a boost, the first dealer said.
Exporters usually trade when the Taiwan dollar is weak so they can exchange their U.S. dollar earnings to more of the local currency. They need local currency for cash needs at home.
In the non-deliverable forwards market, six-month NDFs narrowed to -0.080/-0.030 from -0.250/-0.200 in the previous session, meaning investors believe the Taiwan dollar will likely firm by a smaller degree in half a year.
The Taiwan dollar has fallen 11 percent since rallying to a 10-1/2-year high in late March, mainly due to fund outflows.
On the smaller Cosmos exchange , the Taiwan dollar weakened to T$33.320 to the U.S. dollar from the previous close of T$32.990.
(Reporting by Gina Chang and Rachel Lee)
((miaojung.lin@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging: miaojung.lin.reuters.com@reuters.net)) Keywords: MARKETS TAIWAN CURRENCY/

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Thursday, 23 October 2008 17:04:52RTRS [nTP6876] {EN}ENDS