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17:05 15Jan2009 RTRS-Taiwan dollar at 1-mth closing low on fund outflows

(Adds closing values, details)
TAIPEI, Jan 15 (Reuters) - The Taiwan dollar weakened to a one-month closing low on Thursday as foreign funds pulled their money out of a falling local stock market and on concerns that weak U.S. retail sector could further hit the island's exports.
The Taiwan dollar fell to a low of T$33.384 before paring losses to close at T$33.379 to the U.S. dollar, its lowest close since Dec. 10 and weaker than Wednesday's close of T$33.258.
Volume on the main Taipei Forex Inc exchange was moderate at $1.174 billion, higher than Wednesday's $686 million.
"Foreign funds pulled a lot of their money out of Taiwan dollar holdings today, and the U.S. dollar is showing a lot of strength globally, so that just dragged the local currency down," said a dealer in Taipei.
Foreign institutions sold the Taiwan dollar as they pulled out of local stocks <.TWII>, which closed the day down more than 4 percent as DRAM shares plunged, while weak U.S. retail data weighed on the island's export-reliant tech sector.
Foreign investors sold a total of T$14.61 billion ($437 million) on Thursday, their highest net outflow in 2009, bringing their net sales to T$31.43 billion so far this year.
Dealers said they expected the rate to test the T$33.500 level before the Lunar New Year holiday at the end of the month. The Taiwan dollar markets will be closed from Jan. 24 to Feb. 1 for the holiday.
Expectations that the European Central Bank will cut interest rates could also pressure the Taiwan dollar, dealers said, as such a move would further strengthen the U.S. currency.
"The ECB meeting is the one thing that most investors are factoring in right now, and it'd be quite surprising if they didn't cut rates as the market expects," said another dealer.
On the smaller Cosmos exchange, the Taiwan dollar closed at T$33.370 compared to Wednesday's close of T$33.245.
(Reporting by Kelvin Soh and Yvette Chen; Editing by Tomasz Janowski)
((kelvin.soh@thomsonreuters.com; +886 2 2508 0815; Reuters Messaging: kelvin.soh.reuters.com@reuters.com))
Keywords: MARKETS TAIWAN CURRENCY/

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Thursday, 15 January 2009 17:05:28RTRS [nTP237133] {EN}ENDS