The Taiwan dollar fell to a one-month low on Monday as importers bought US dollars and foreign funds sold the island's shares, with investors turning their focus toward a possible US rate cut on Tuesday. The Taiwan dollar ended weaker at T$33.110 to the US dollar from the previous close of T$33.071, with dealers saying that the central bank sold US dollars in late trade to curb the local currency's fall.
The Taiwan dollar, which had opened stronger at T$33.050, fell as far as T$33.130, the lowest intraday level since August 16. Volume on the main Taipei Forex Inc exchange was thin at US $536 million, lower than US $671 million on Friday.
"The stock market didn't do very well today and that sparked foreign fund outflows, which was why the Taiwan dollar extended its fall," said a dealer in Taipei. "Key oil firms were also buying US dollars," said the dealer. Importers, such as oil companies, need US dollars to buy raw materials and equipment from abroad.
Taiwan stocks rose slightly at the open, but failed to hold onto gains, losing 1.46 percent by the close. Foreign institutions sold a net T$7.478 billion (US $226 million) in Taiwan stocks during the session.
Investors widely expect the Federal Reserve to cut the 5.25 percent federal funds rate by at least 25 basis points to help cushion the economy from the impact of the credit squeeze and housing slump.
Taiwan's central bank will hold its rate-setting meeting on Thursday and the market is mixed on whether it will lift rates by 12.5 basis points or keep them steady, depending on what the Fed does on Tuesday. On the smaller Cosmos exchange, the Taiwan dollar stood at T$33.119 to the greenback, compared with the previous close of T$33.078.
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