(Adds central bank's comments in paragraph 4-5)
TAIPEI, Dec 17 (Reuters) - The Taiwan dollar posted its biggest gain in 1-½ months to end at an eight-week high after the U.S. Federal Reserve cut interest rates to as low as zero, making the U.S. currency less attractive.
The Taiwan dollar
It gave up some gains to end at T$32.720, its strongest finish since Oct. 21 and largest one-day percentage jump since Oct. 30. The Taiwan dollar finished at T$33.030 on Tuesday.
"The Taiwan dollar is relatively stable," the central bank said in a brief statement after the market closed.
It listed movements in global currencies on the day, which showed that the New Zealand dollar
Volume on the Taipei Forex Inc. exchange was heavy at $2.031 billion, sharply higher than $1.492 billion a day earlier.
"Everyone was selling the U.S. dollar, including foreign investors, interbank dealers and exporters," said a dealer at a local bank.
The U.S. dollar dipped towards 13-year lows against the yen
Taiwan's benchmark discount rate is now at 2.0 percent, while U.S. interest rates are nearly zero, making assets denominated in the U.S. currency less attractive.
"The local currency will likely keep its upward momentum as exporters' demand increases near the end of the year," the dealer said.
"But we'll still keep an eye on the movement of local and global stock markets. We'll also watch if Taiwan's central bank follows the United States to cut rates," he said, adding the local currency will likely strengthen to as much as T$32.5 in the near term.
Exporters, which prefer a weaker Taiwan dollar so they can convert their U.S. dollar earnings to more of the local currency, bought the Taiwan dollar as some of them expected it to rise further.
Despite the day's rally, the Taiwan dollar has fallen 9 percent since hitting a 10-1/2-year high in late March when investors bet on closer ties with China. Since the beginning of the year, it has lost nearly 1 percent.
In the non-deliverable forwards market, six-month NDFs widened to -0.430/-0.390 from -0.370/-0.300 in the previous session, indicating investors saw the Taiwan dollar strengthening more in half a year.
On the smaller Cosmos exchange
14:28 17Dec2008 RTRS-Taiwan stocks at 1-week closing high, UMC surges
* Market hits 1-week closing high helped by U.S. gains
* UMC limit-up after share buyback announcement
* DRAM stocks rally on government support
(Adds details and quote)
Gina Chang
TAIPEI, Dec 17 (Reuters) - Taiwan stocks ended up 0.67
percent at a one-week high on Wednesday, with UMC <2303.TW>
leading the rise after announcing a share repurchase programme
and DRAM shares jumping on hopes of a government rescue.
The main TAIEX share index <.TWII> closed 31.13 points higher
at 4,648.02, its strongest finish since Dec. 11, following a
rally on Wall Street that saw the Nasdaq <.IXIC> jump 5.4
percent.
Turnover was active at T$94.5 billion ($2.9 billion), rising
from Tuesday's T$58.4 billion.
United Microelectronics Corp, the world's No.2 contract chip
maker, jumped by its daily 7 percent maximum after the company
said it would buy back 300 million shares to give to employees.
[ID:nTP43619]
DRAM shares also rallied, with analysts saying the worst
period for memory chip makers had passed after Taiwan's
government pledged on Tuesday to support the local industry by
helping it to develop more technology. [ID:nTP199281]
"The government must help DRAM firms or they'll definitely
fail," said Eddy Chen, vice president of National Investment
Trust Co Ltd.
"But it's hard to say how long the government would be able
to support DRAM makers. These companies need to do something to
help themselves, such as improving long-term competitiveness."
Taiwan's top DRAM maker Powerchip <5346.TWO> gained 1.93
percent and smaller rival Nanya Technology <2408.TW> jumped 3.9
percent. ProMOS <5387.TWO> ended limit-up.
The semiconductor sub-index <.TSII> was up 2.43 percent,
while the electronics sub-index <.TELI> rose 0.87 percent.
The financial sub-index <.TFNI> advanced 0.36 percent, lifted
by Cathay Financial <2882.TW>, the island's largest financial
holding firm, which climbed 1.54 percent.
The moves followed a broader rally for financial shares
globally, after the U.S. Federal Reserve chopped its benchmark
interest rates to as low as zero and pledged to use all available
tools to turn back a deepening recession. [ID:nLG10118]
"The interest rate cut by Federal Reserve boosted stock
markets worldwide, but gains were capped as investors turned
cautious over the weak global economy," said Chen.
"Taiwan's central bank might follow suit and further lower
interest rates around January as cash demand rises near the
Chinese new year."
HOT STOCKS
-- Taiwan's top chip designer Mediatek Inc <2454.TW>, the
most active share by turnover, rose 1.1 percent.
Mediatek said it was unaware of attempts by China Telecom
<0728.HK> to buy a stake in the company, amid reports the Chinese
operator may be interested in a tie-up or acquisition.
[ID:nTP215476]
-- Fubon Financial <2881.TW> ended 0.66 percent lower after
Standard & Poor's Ratings Services saw a negative outlook for the
firm's insurance unit. [ID:nWLA3660]
--------------------TAIEX IN PERSPECTIVE--------------------
Move on day 0.67 percent
Close on day 4,648.02
2008 intraday high 9,309.95
2008 intraday low 3,955.43
All time high 12,682.41 12 FEB 1990
------------------------------------------------------------
For a table of foreign trading in Taiwan stocks, double-click
on [ID:nTP170358]
(US$1=T$32.7)
(Reporting by Gina Chang; Editing by Jonathan Hopfner)
((gina.chang@thomsonreuters.com; +886 2 2508-0815; Reuters
Messaging:gina.chang.thomsonreuters.come@reuters.com))
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Wednesday, 17 December 2008 14:28:42RTRS [nTP208116] {EN}ENDS
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