Taiwan dollar weakens; eyes on Asian peers, importers

* Taiwan dollar retreats from more than three-month high

* Investors cover short positions in U.S. dollar

* NDFs narrow, indicating unit will firm by a smaller degree

TAIPEI, Sept 18 - The Taiwan dollar <TWD=TP> weakened on Friday from a more than three-month high hit in the previous session as investors who are short in the U.S. dollar squared positions before the weekend.

"The market is still basically going short on U.S. dollars, but there are several markets in Asia going for a long weekend and market players are short-covering U.S. dollar positions," said a dealer in Taipei.

The market has been favouring risky assets, such as emerging Asian currencies, over the past month or so as the global economy is on the mend.

Dealers said investors in Taiwan, like some other parts in Asia, were adjusting their positions in the spot and offshore NDF (non-deliverable forwards) market before markets in Japan, Singapore and Indonesia closed for a long weekend.

Taiwan's stocks <.TWII> inched down on Friday, pulling back from a 14-month closing high on Thursday on losses in some technology shares.

Dealers said there could be some U.S. dollar demand from oil importers later in the day, which would pressure the Taiwan currency.

0215 GMT PREVIOUS DAY T$ (Taipei Forex Inc) 32.454 32.410 (close) Volume in $ mln (Taipei Forex Inc) 214 361 T$ (Cosmos) 32.440 32.395 (close) Six-month NDFs <PNDF> -0.540/-0.505 -0.560/0.510 Note: Taipei Forex Inc is Taiwan's main forex exchange; Cosmos is a smaller exchange. Both exchanges close at 0800 GMT. Source: NDFs quotations from Prebon Asia For more foreign exchange news, please click [nTOPFRX]