twn stock 0212

16:46 12Feb2009 RTRS-Taiwan dollar hits 4-1/2-year closing low on funds

(Adds closing prices, quotes)
TAIPEI, Feb 12 (Reuters) - The Taiwan dollar weakened on Thursday, reversing course to a 4-1/2-year closing low, as foreign investors pulled out funds in the stock market and the central bank intervened to keep the currency weak.
The Taiwan dollar strengthened to as much as T$33.930 against the U.S. dollar in early trade due to exporters' purchases, but changed course in later trade. It closed down at T$34.025, its weakest finish since Aug 31, 2004.
Exporters prefer a weaker Taiwan dollar so they can exchange their U.S. dollar earnings to more of the local currency.
"Losses in the stock market pressured the Taiwan dollar. And there were foreign fund outflows," said a dealer in a local bank.
Taiwan stocks <.TWII> finished 2.39 percent lower on Thursday, ending a four-session winning streak as investors locked in profits from previous gains.
Foreign institutions sold a net T$3.9 billion ($115 million) worth of Taiwan stocks on Thursday, bringing their purchases to T$9.2 billion so far this month.
The Taiwan dollar was also pressured by central bank intervention.
"The central bank bought some U.S. dollars near the end of trade, but the amount it bought was not very much," said another dealer in Taipei.
The central bank bought U.S. dollars over the past few sessions as it wanted to help exporters weather an exports slump during the global downturn. [ID:nTP338600] [ID:nTP167618]
A cheaper local currency would make Taiwan's exports more competitive compared with other Asian economies.
Dealers said the Taiwan dollar would continue its downward trend, and expected the currency to trade between T$33.9 and T$34.1 for the rest of this week.
Taiwan's top state planner stopped short of forecasting where the Taiwan dollar was headed during a news conference on Thursday.
"A weaker Taiwan dollar will help in exports, but that will also make imports more expensive and affect investments," Chen said, when asked whether the Taiwan dollar would weaken further.
In the non-deliverable forwards market, six-month NDFs traded at 0.040/0.090, compared with 0.020/0.060 the previous session, meaning that investors saw the Taiwan dollar weakening by a larger degree in half a year.
Volume on the main Taipei Forex Inc exchange was light at $517 million, lower than $731 million a day earlier.
On the smaller Cosmos exchange , the Taiwan dollar softened to T$34.020 to the U.S. dollar from the previous close of T$33.987.
(Reporting by Gina Chang; Editing by Nick Macfie)
((gina.chang@thomsonreuters.com; +886 2 2508-0815; Reuters Messaging:gina.chang.thomsonreuters.come@reuters.com)) Keywords: MARKETS TAIWAN CURRENCY/

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Thursday, 12 February 2009 16:46:08RTRS [nTP42699] {EN}ENDS