“We will be closely monitoring the market situation,” a CBC official told Reuters, offering standard comments from the bank.

The CBC officials said there was ample liquidity in the Taiwan market and brushed aside market worries that the U.S. subprime market could have a huge impact on the island. Taiwan dealers said the Fed’s move should support the Taiwan dollar in the short term.

“If U.S. stocks maintain their gains, then Taiwan stocks will follow suit and that will support the Taiwan dollar in the near term,” said a dealer in Taipei. “Whether that support can last is still uncertain. The fact that the Fed is making moves shows that the subprime problem could be worse than what we’d expected. So we’ll have to see what the Fed does next and how U.S. markets go.”

The Fed cut its discount rate governing direct Fed loans to banks by a half-point to 5.75 percent in a unexpected move aimed at keeping credit flowing and calming jittery global markets. The federal funds rate remains at 5.25 percent. The U.S. announcement came after Taiwan markets closed.

On Friday, the Taiwan dollar strengthened sharply, rebounding from a 2-1/2-month low, as the central bank sold U.S. dollars.

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