The Taiwan dollar fell on Tuesday as the central bank intervened to keep gains in check, after a move by the authorities to raise the rate at which banks borrow and lend to each other boosted the currency. The local currency ended lower at T$31.800 against the US dollar from the previous session's T$31.787. Volume fell to $598 million from Monday's $640 million.

"The Taiwan dollar fell towards the end of trading as the central bank bought Taiwan dollars, but the amount was small," said a dealer. Taiwan moved to rein in excess market liquidity by raising the overnight lending rate by a bigger-than-usual 1 basis point on Tuesday, hitting the stock market and bonds while pointing to a possible tightening of monetary policy. The Taiwan dollar is expected to trade between T$31.70 and T$31.90 before the Lunar New Year, the dealer said.

Copyright Reuters, 2010