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Taiwan dollar up sharply on funds, exporters

Reuters - Saturday, May 17

TAIPEI, May 16 - The Taiwan dollar firmed sharply on Friday due to demand from foreign investors and exporters and on expectations that the central bank will allow the local currency to rise to help curb inflationary pressures.

The Taiwan dollar , which rose for a second day, ended stronger at T$30.660 to the U.S. dollar from its previous close of T$30.880. It had opened weaker at T$30.890.

The Taiwan dollar has gained 5.5 percent since the beginning of the year as investors bank on better economic prospects after the China-friendly Nationalist Party won legislative and presidential elections.

Volume on the main Taipei Forex Inc. exchange was $1.161 billion, higher than $1.142 billion a day earlier.

"U.S. dollar selling by foreign institutions and exporters was brisk," said a dealer in Taipei.

"The central bank tried to stem rise, though it wasn't very aggressive and we're getting the sense that it wants the currency to firm gradually as inflationary pressures are likely to increase," the dealer said.

On Friday, foreign institutions became net buyers on Taiwan's equity market for a fourth straight session by purchasing a net T$22.21 billion in Taiwan stocks, and that translated into foreign fund inflows in the forex market.

Dealers said the central bank would likely allow the Taiwan dollar to firm gradually in the short term as domestic oil and electricity prices are expected to rise after new President Ma Ying-jeou takes office on May 20.

Taiwan's central bank keeps the Taiwan dollar in a managed float and usually intervenes to ensure the local currency strengthens only gradually.

On the smaller Cosmos exchange <COSMOS1>, the Taiwan dollar firmed to T$30.653 to the U.S. dollar, compared with the previous close of T$30.872.

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