tw stock 1218

17:05 18Dec2008 RTRS-Taiwan dlr hit 2-mth high on low US interest rates

(Updates to close)
TAIPEI, Dec 18 (Reuters) - The Taiwan dollar shot up to its highest close in two months on Thursday as investors unloaded U.S. dollars and turned to higher yielding currencies after the Fed slashed rates.
The Taiwan dollar hit a high of T$32.432 against the U.S. dollar after the noon break, a level not seen since Oct. 16, though some U.S. dollar buying central bank intervention curbed it from rising further.
It gave up some gains to end at T$32.471, its highest close since Oct. 15, higher than Wednesday's finish of T$32.720.
Volume on the main Taipei Forex Inc exchange was heavy at $1.713 billion, but lower than $2.031 billion a day earlier.
"The central bank intervened, but not very actively because the U.S. dollar is very weak now," said a dealer at a local bank.
The U.S. dollar dropped to a 2-½ month low against the euro on Thursday after the Federal Reserve's dramatic interest rate cut further eroded the greenback's relative yield appeal. [ID:nT211890]
Taiwan's central bank stepped in to prevent the Taiwan dollar from rising steeply as it prefers a relatively weak local currency to support the island's sagging exports.
"There were a lot of foreign fund inflows because the stock market has been gaining recently," the dealer said.
Foreign institutions continued net buying of Taiwan shares for a fourth day of T$2 billion ($62 million) on Thursday, after domestic stocks <.TWII> closed up 1 percent, rising for a fourth session.
Exporters' deals also added support to the Taiwan dollar. Exporters need to convert their U.S. dollar earnings into the local currency at the end of the month and year to meet their cash needs.
Although the Taiwan dollar jumped on Thursday, it is still 8 percent lower since hitting a 10-1/2-year high in late March, when anticipation of improving ties with China boosted sentiment.
Dealers said the Taiwan dollar could continue its rise and gain to as high as T$32.0 by the end of the year, but the central bank's attitude would be key to its future movement.
On the smaller Cosmos exchange , the Taiwan dollar rose to T$32.461 to the U.S. dollar from the previous close of T$32.663.
(Reporting by Yvette Chen and Gina Chang; Editing by Keiron Henderson)
((gina.chang@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging:gina.chang.thomsonreuters.come@reuters.com)) Keywords: MARKETS TAIWAN CURRENCY/

For Related News, Double Click on one of these codes:
[M] [T] [Z] [MF] [RNP] [DNP] [PTD] [PMF] [TW] [ASIA] [FRX] [EMRG] [LEN] [RTRS] [TWD/] [TWD=TP]

For Relevant Price Information, Double Click on one of these codes:

Thursday, 18 December 2008 17:05:18RTRS [nTP213314] {EN}ENDS