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Taiwan dollar at 2-1/2-wk low, exporters support
Reuters - Wednesday, January 7
TAIPEI, Jan 6 - The Taiwan dollar weakened to a 2-1/2-week low on Tuesday as the central bank bought U.S. dollars to keep the local currency weak, though exporters' deals curbed the losses.
The Taiwan dollar <TWD=TP>, falling for a second session, traded almost 1 percent weaker to T$33.314 in early trade, the lowest intraday level since Dec. 15.
But it later pared some losses to close at T$33.054, still down from Monday's finish of T$33.005.
Volume on the main Taipei Forex Inc exchange was moderate at $954 million, lower than the $1.136 billion recorded on Monday.
"Everyone suspects the central bank was the one that pushed down the Taiwan dollar so rapidly this morning," said a dealer in Taipei.
"Who else would want to make such a huge bid at such a big change so early in the morning?" the dealer said.
The central bank's moves to weaken the local currency so rapidly over the past week surprised some dealers, as it usually keeps the Taiwan dollar in a managed float to prevent massive fluctuations.
However, exporter rushing to convert their foreign earnings back into Taiwan dollars ahead of the Lunar New Year holiday pared some of the local currency's early losses.
The Lunar New Year takes place in the last week of January this year, during which the Taiwan market will be closed for an entire week.
Exporters usually prefer a weaker Taiwan dollar as it allows them to convert every U.S. dollar unit into more of the local currency.
Dealers said the central bank had been concerned over the Taiwan dollar's relative strength compared with the South Korean won <KRW=>, as that erodes the island's export competitiveness since both economies share similar trade profiles. The won weakened by about 25 percent in 2008, while the Taiwan dollar eased by just over 1 percent during the same period.
On the smaller Cosmos <COSMOS1> exchange, the Taiwan dollar closed at T$33.020, weaker than Monday's close of T$33.003.
(Reporting by Kelvin Soh and Yvette Chen, Editing by Jacqueline Wong)
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