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17:22 16Feb2009 RTRS-Taiwan dollar at over 5-yr low on economic worries

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TAIPEI, Feb 16 (Reuters) - The Taiwan dollar fell to more than a five-year low on Monday as foreign funds and interbank dealers bought U.S. dollars actively on concerns over the domestic economy.
The Taiwan dollar , which weakened for an eighth straight session, extended its fall sharply in late trade to eventually close at T$34.280 to the U.S. dollar, which is the weakest finish since Aug. 20, 2003.
The T$34.280 mark is also Monday's intraday low, which was the weakest since Dec. 1, 2003 when the day's lowest level was T$34.291.
Volume on the main Taipei Forex Inc exchange was $800 million, higher than $691 million on Friday.
Daily volumes of the Taiwan dollar has been low falling below the $1 billion-mark due to the exports slump and market worries that the central bank would intervene by buying U.S. dollars actively to allow the Taiwan dollar to weaken to help exporters.
The Taiwan dollar has lost 4.3 percent since the start of 2009 as the economy suffered from an exports slump and weak domestic consumption during the global downturn.
"Everybody started buying U.S. dollars after the level fell through T$34.2. Exporters would have provided some support, but they didn't want to sell U.S. dollars today because they expect the Taiwan dollar to drop further," said a dealer.
The central bank issued a statement that the Taiwan dollar's level was relatively stable compared with other Asian currencies, reiterating its previous comment.
Exporters usually prefer a relatively weak Taiwan dollar as they can exchange their foreign currency earnings into more of the local currency.
On Monday, Taiwan's main TAIEX index <.TWII> inched down 0.03 percent, with foreign funds selling T$2.031 billion ($59 million).
The market is generally concerned about Taiwan's economy, with a Reuters poll estimating that the economy in the fourth quarter will contract by a record 5.6 percent from the same period a year earlier [ID:nTP367581].
The government will announce the figures on Wednesday.
Offshore investors also covered their short positions in the U.S. dollar.
Six-month NDFs (non-deliverable forwards) quoted at 0.050/0.100, compared with 0.030/0.080 on Friday, indicating that the Taiwan dollar will weaken by the larger degree in half a year.
On the smaller Cosmos exchange , the Taiwan dollar fell to T$34.250 to the U.S. dollar from Friday's close of T$34.046.
(Reporting by Lee Chyen Yee and Lin Miao-jung, Editing by Jacqueline Wong)
((chyenyee.lee@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging: chyenyee.lee.reuters.com@reuters.net)) Keywords: MARKETS TAIWAN CURRENCY/

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Monday, 16 February 2009 17:22:36RTRS [nTP109360] {EN}ENDS