TWD 3 Nov

16:56 03Nov2008 RTRS-Taiwan dollar rises on stocks, China trade ties

(Updates to close)
TAIPEI, Nov 3 (Reuters) - The Taiwan dollar rose on Monday, buoyed by foreign fund inflows and gains in the local stock market as investors cheered a visit by China's top Taiwan negotiator, Chen Yunlin.
The Taiwan dollar hit as high as T$32.766 to the U.S. dollar after the lunch break, but pared gains to close at T$32.898, still up from the previous closing price of T$33.000.
Volume on the main Taipei Forex Inc exchange was active at $1.581 billion, higher than Friday's $1.137 billion.
"There were some foreign fund inflows and Chen Yunlin's visit also helped the market rise higher," a dealer in Taipei said.
Taiwan stocks <.TWII> closed 2.55 percent higher on Monday, their third consecutive rise, as investors bought into PC companies on their strong outlook, and financial and tourism shares rose on prospects of warmer cross-strait ties.
China's top Taiwan negotiator started his Taiwan visit on Monday and is expected to sign a seires of deals with Taiwan to strengthen trade ties and transport links.
A stronger South Korean won further supported the Taiwan dollar.
The South Korean won rose 2.3 percent against the U.S. dollar on Monday as the government announced a fresh $11 billion economic stimulus package, easing worries about a sharp slowdown in Asia's fourth-largest economy.
Offshore investors also bet on a stronger Taiwan dollar in half a year, with six-month NDFs widening to -0.510/-0.460 from -0.360/-0.310 in the previous session.
However, the Taiwan dollar's rise was limited as the central bank sold the Taiwan dollar to ensure it did not rise too much to protect the island's export competitiveness.
"The central bank stepped in to keep the Taiwan dollar's rise by about T$0.1," said another dealer in Taipei.
Some U.S. dollar purchases also limited the Taiwan dollar's gain.
"Interbank dealers bought a lot U.S. dollars and some of them could be importers," said the dealer.
On the smaller Cosmos exchange , the Taiwan dollar firmed to T$32.850 to the U.S. dollar from the previous close of T$32.983.
(Reporting by Gina Chang, Rachel Lee and Yvette Chen; Editing by Anne Marie Roantree)
((chyenyee.lee@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging: chyenyee.lee.reuters.com@reuters.net))

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Monday, 03 November 2008 16:56:56RTRS [nTP302389] {EN}ENDS