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17:27 04Feb2009 RTRS-Taiwan dlr up for 3rd straight day on fund inflows

(Updates closing values, adds details)
TAIPEI, Feb 4 (Reuters) - The Taiwan dollar rose for a third straight session on Wednesday, buoyed by foreign fund inflows into a rising stock market and exporters' deals, but central bank intervention capped the local currency's gains.
The Taiwan dollar hit a high of T$33.602 in early trade on Wednesday, its highest level since Jan. 23. Markets were closed last week for the Lunar New Year holiday.
However, the local currency later pared some of those gains to close at T$33.670, still stronger than the previous day's finish of T$33.720.
"There was some central bank intervention in the closing minutes of trade," said a dealer in Taipei.
"But even after three days of climbs, it's still weaker than where it was about a week before the Lunar New Year, so the Taiwan dollar could strengthen for a little bit more."
Even though the Taiwan dollar rose for a third straight day, it has been trending lower and lost about 2.5 percent since the start of 2009 mainly on worries over the global downturn.
The central bank's preference to allow the currency to depreciate to maintain Taiwan's export competitiveness also helped push the local currency lower this year.
Foreign investors bought a total of T$770 million ($23 million) worth of stocks on the local equity market on Wednesday, reversing two days of net outflows this week amid a climbing stock market. Taiwan stocks <.TWII> rose for a third straight day to hit a three-week closing high.
"The central bank remains very sensitive to export figures, and if there is any suggestion that exports could weaken, we could possibly see much stronger intervention from them," said another dealer in Taipei.
Taiwan is due to announce its January trade figures on Monday after posting a record fall in December's exports.
Dealers said exporters were also selling off their U.S. dollar earnings as they were worried that the Taiwan dollar could climb further, which meant that they will not be able to swap into more of the local currency.
Volume on the main Taipei Forex Inc exchange was thin at $592 million, lower than the $834 million recorded on Tuesday.
On the smaller Cosmos exchange , the Taiwan dollar closed at T$33.668, stronger than the previous day's close of T$33.690.
(Reporting by Kelvin Soh and Argin Chang, Editing by Jacqueline Wong)
((kelvin.soh@thomsonreuters.com; +886 2 2508 0815; Reuters Messaging: kelvin.soh.reuters.com@reuters.com)) Keywords: MARKETS TAIWAN CURRENCY/

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Wednesday, 04 February 2009 17:27:29RTRS [nTP33460] {EN}ENDS