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Dollar sweeps higher in Europe

LONDON: The dollar motored higher in late Europe with brief pit-stops for profit-taking, and analysts said it had plenty of fuel to rally further.

"Sentiment towards the dollar has clearly turned -- it's now just a question of how quickly it can rally," said Nick Stamenkovic, economist at DKB International in London.

Comments by Bundesbank deputy president Johann Wilhelm Gaddum hinting at lower German interest rates boosted dollar/mark, while dollar/yen continued to ride the upwave sparked by Japan's deregulatory package last week.

By 1528 GMT the dollar was trading at 1.4339/44 marks, off an earlier high of 1.4391 but still more than a pfennig stronger than Thursday's late European level of 1.4205/15.

Dollar/yen rose to 93.68/73 from late on Thursday's 92.71/81. It earlier took a shot at 94.00.

Andy Hellard, senior corporate dealer at Credit Suisse, said the dollar's climb on the yen was lighting the way for dollar/mark. "Dollar/yen has certainly turned, and therefore is giving dollar/mark a more stable and confident tone," he said.

"The next level, a trendline at 94.30/35, will be quite hard to break, but eventually it'll probably go higher," he added.

The remarks by the Bundesbank's Gaddum put a rocket under the dollar after it paused for profit-taking, analysts said.

Gaddum told Reuters there was still room for German banks to pitch their repo bids lower, and said there was space for manoeuvre between the repo rate -- cut by five basis points to 4.45 percent this week -- and the 4.00 percent discount rate.

"If the repo continues to decline and the Bundesbank hints at further cuts in interest rates, then 1.45 marks will be the next target in coming weeks," said Stamenkovic at DKB.

The dollar stumbled briefly after an unexpected 0.1 percent drop in U.S. July retail sales.

The June figure was revised to a 0.8 percent increase. U.S. July CPI came in as the market had forecast, rising 0.2 pct from June's 0.1 percent, leading economists to conclude that inflationary pressures remained subdued.

Federal Reserve Board Governor Lawrence Lindsey later fuelled that view, telling Reuters Financial Television he saw no buildup of inflation pressures in the U.S. economy at present.-Reuter