Taiwan dollar falls on funds, exporters support

* Foreign fund outflows, US$ short covering pushed down T$

* Exporters limit losses

* Dealers eye clearer direction in stocks

TAIPEI, Oct 16 - The Taiwan dollar fell on Friday on foreign fund outflows and some investors short-covering the U.S. dollar, though exporters kept losses in check.

"Foreign funds, some local investors were covering short positions in the U.S. dollar, though most people are expecting the Taiwan dollar to rise further in the long term," said a dealer in Taipei.

"There were a few exporters in the market that were selling U.S. dollars, so there is some support there."

The Taiwan dollar has been hovering in a tight range mainly between T$32.2 and T$32.4 over the past week or so partly due to some wariness over the central bank's U.S. dollar buying intervention.

The local currency has more room for rises, in line with the Asian trend, but the central bank wants to curb its strength to help maintain the island's export competitiveness.

Dealers said they were monitoring movements in the island's stock market for further leads. So far, the main TAIEX index traded roughly flat, after hitting a 16-month high in the previous session.

In the offshore non-deliverable forwards (NDFs) market, six-month NDFs narrowed on U.S. dollar short-covering, meaning that the market expects the Taiwan dollar to rise less than earlier estimates.

0230 GMT PREVIOUS SESSION T$ (Taipei Forex Inc) 32.258 32.218 (close) Volume in $ mln (Taipei Forex Inc) 209 224 T$ (Cosmos) 32.255 32.215 (close) Six-month NDFs -0.810/-0.780 -0.840/-0.790

Note: Taipei Forex Inc is Taiwan's main forex exchange; Cosmos is a smaller exchange. Both exchanges end trading at 0800 GMT

Source: NDFs quotations from Prebon Asia

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