Taiwan dollar off decade high ahead of c.bank meet

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TAIPEI, March 27 (Reuters) - The Taiwan dollar TWD=TP eased off a 10-1/2-year high on Thursday, due to foreign fund outflows as the stock market fell and to short-covering of U.S. dollars, with investors awaiting an interest rate decision by Taiwan's central bank later in the day.

The Taiwan dollar ended weaker at T$30.180 to the U.S. dollar, compared with the previous close of T$30.010, the highest finish since October 1997. Before Thursday, the Taiwan dollar posted gains for 7 consecutive sessions on better economic prospects.

Volume on the main Taipei Forex Inc exchange was $2.001 billion, compared with $1.858 billion a day earlier.

"Taiwan's stock market fell today so the central bank used weak sentiment to push the U.S. dollar higher," said one dealer at a local bank.

Taiwan's central bank has also been buying U.S. dollars to stem the Taiwan dollar's recent sharp rise.

The central bank wants the Taiwan dollar to be on a gradual firming trend because it needs to curb inflationary pressures and yet maintain Taiwan's export competitiveness.

Since the beginning of the year, the Taiwan dollar has risen 7 percent.

On Thursday, foreign fund sold a net T$25.6 billion ($850 million) in Taiwan stocks .TWII, which fell 1.85 percent following losses on Wall Street.