twd 0202

16:41 02Feb2009 RTRS-Taiwan dollar off 4-yr low, c.bank tempers gains

(Updates closing values, adds quotes)
TAIPEI, Feb 2 (Reuters) - The Taiwan dollar pulled back from its lowest level in more than 4 years on foreign fund inflows on Monday, its first trading day after the week-long Lunar New Year holiday, but central bank intervention kept the trading range limited.
The Taiwan dollar opened at a four-year low of T$33.900, the weakest intraday level since Oct 1, 2004, but later reversed losses to close the session at T$33.749.
Volume on the main Taipei Forex Inc. exchange was thin at $509 million, lower than the $840 million recorded on its last trading day on Jan. 23.
"The central bank stepped in during the opening few minutes and just moments before trading ended," said a dealer in Taipei. "It's likely that they'll be around for the next couple of days because they don't want the local currency to rise too quickly."
The central bank, which manages the Taiwan dollar in a managed float, sometimes intervenes to weaken the Taiwan dollar to help exporters compete with their Asian peers.
A weak Taiwan dollar makes the island's exports cheaper to overseas markets, allowing companies to compete with its regional peers such as South Korea.
However, dealers said they do not expect the Taiwan dollar to appreciate in the short term and could test the T$34 level soon, as fears of a longer-than-expected U.S. recession took grip and added to the U.S. currency's appeal as a safe haven for investors.
"Everyone is coming back from the Lunar New Year holiday, and nobody wants to start the new year on a bad foot," said another dealer in Taipei. "I'm not confident this could last for much longer though, with the economy looking the way it is."
On the smaller Cosmos exchange , the Taiwan dollar fell to T$33.745 from its previous close of T$33.590.
(Reporting by Kelvin Soh and Argin Chang; Editing by Ken Wills)
((kelvin.soh@thomsonreuters.com; +886 2 2508 0815; Reuters Messaging: kelvin.soh.reuters.com@reuters.com)) Keywords: MARKETS TAIWAN CURRENCY/

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Monday, 02 February 2009 16:41:56RTRS [nTP316155] {EN}ENDS