TWD 02 Dec

17:22 02Dec2008 RTRS-Foreign funds drag Taiwan dlr to 1-½ mth low

(Adds close, details)
TAIPEI, Dec 2 (Reuters) - The Taiwan dollar weakened to a 1-½ month closing low on Tuesday on foreign fund outflows, as sharp slides in regional currencies further dampened investor confidence on a day when most Asian stocks slumped.
The Taiwan dollar fell for a second straight day to close at T$33.489 to the U.S. dollar from the previous close of T$33.350, its lowest close since Oct. 27. It had fallen to an intraday low of T$33.516 in early trade.
Volume on the Taipei Forex Inc. exchange was thin at $778 million, but above the previous session's $675 million.
"The Korean won and other regional currencies fell today and that dragged the Taiwan dollar down," said a dealer in Taipei.
"The stock market falling here in Taiwan and around Asia also didn't help things very much."
The Taiwan dollar frequently tracks the South Korean won as both economies share similar trade policies and depend heavily on their export-reliant tech sectors.
Both the won and the Chinese yuan fell against the U.S. dollar on Tuesday, with the yuan hitting the bottom of its daily trading band for a second straight day.
The local currency was also dragged down by Taiwan stocks <.TWII>, which fell 3.6 percent, tracking heavy losses on Wall Street and as chip bellwether TSMC <2330.TW> slid after the company cut its sales and margin forecasts.
However, the Taiwan dollar received some support from exporters who moved in when the local currency weakened to below T$33.500, dealers said.
Exporters generally prefer a weaker Taiwan dollar as it allows them to get more of the local currency for every U.S. dollar.
Dealers said they expected the Taiwan dollar to weaken further to about T$33.700 to T$33.800 before the end of the year.
The Taiwan dollar has lost 12 percent since hitting a 10-1/2-year high in late March, mainly due to increasing economic worries linked to the global financial crisis.
Six-month NDFs were quoted at -0.010/0.030, compared with -0.100/-0.050 in the previous session, indicating that the market expects levels of the Taiwan dollar to be weaker than earlier expected.
On the smaller Cosmos exchange , the Taiwan dollar fell to T$33.480 to the U.S. dollar from the previous close of T$33.349.
(Reporting by Kelvin Soh and Lin Miao-jung; Editing by Lee Chyen Yee)
((kelvin.soh@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging:kelvin.soh.reuters.com@reuters.net))
Keywords: MARKETS TAIWAN CURRENCY/

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Tuesday, 02 December 2008 17:22:20RTRS [nTP255144] {EN}ENDS