Taiwan dollar up on banks, funds, trade seen narrow

* Some support from foreign fund inflows

* Market awaits Fed and Taiwan policy meeting on Wed, Thurs

* NDFs widen, indicating a much firmer Taiwan dollar

TAIPEI, Sept 22 - The Taiwan dollar <TWD=TP> tracked some Asian currencies to become firmer on Tuesday as banks and foreign funds sold U.S. dollars, although trade was thin ahead of the rate decisions later in the week by the U.S. Federal Reserve and Taiwan.

"There were some inflows from interbank dealers and foreign funds in the morning and the whole market was going short on the U.S. dollar," said a dealer in Taipei.

"But we're not expecting any significant movement in the Taiwan dollar since the Federal Reserve and Taiwan's central bank are holding rate-setting meetings this week."

The Fed is not expected to be in a hurry to raise interest rates as inflation is not an imminent threat even though the U.S. economy is improving, when it announces its rate decision late on Wednesday. It will likely keep to its target range at zero to 0.25 percent until at least 2010. [ID:nFEDAHEAD]

Taiwan's central bank will hold its rate-setting meeting on Thursday and is expected to keep its benchmark discount rate at a record low of 1.25 percent. [ID:nTP171816]

0200 GMT PREVIOUS SESSION T$ (Taipei Forex Inc) 32.375 32.419 (close) Volume in $ mln (Taipei Forex Inc) 158 137 T$ (Cosmos) 32.370 32.405 (close) Six-month NDFs <PNDF> -0.570/-0.520 -0.540/-0.490

Note: Taipei Forex Inc is Taiwan's main forex exchange; Cosmos is a smaller exchange

Source: NDFs quotations from Prebon Asia

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