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Mark recovers

slightly in late Europe

LONDON: The mark recovered in afternoon Europe after suffering another onslaught on its European crosses, led by buoyant lira.

Continued speculation the lira may re-join the European Exchange Rate Mechanism, possibly at a rate of 1,050 per mark, pushed the Italian currency to a six-month high of 1,109.25. At 1351 GMT it stood at at 1,112.10/3.10 compared with 1,118.00/9.00 in late Europe on Thursday.

Comments by U.S. economist Rudiger Dornbusch dampened sentiment. He said the lira will slide when Prime Minister Dini leaves and Italy will be run again by a politician.

"As soon as pre-election atmosphere takes hold in Italy, the markets will withdraw their support," he said in an interview.

Italy's improving economic situation was only an illusion, said Dornbusch, citing inflation dropping to at 5.6 percent in July as still above the European average of 3.3 percent.

"The Dornbusch comments were rather downbeat, so some people took profits but it was not dramatic," said a corporate dealer at a UK bank in London.

Thinnning trade also helped to drive the lira lower and other mark crosses higher as markets in Milan and Paris will be closed on Monday.

The peseta touched its 85.07 central rate after benign inflation data for July before retreating to 85.17/23. The consumer price index was unchanged from the previous month and up an annual 4.7 percent, from 5.1 percent the previous month.

The Swedish crown consolidated after breaking the five crown per mark level for the first time since mid-February. It last traded at 4.9915/25 per mark against 5.0120/50 late Thursday.

The French franc stood at 3.4408/13 per mark from 3.4507/12, underpinned by much better than expected July inflation data, which showed a fall of 0.2 percent on the month and 1.5 percent annual rise.-Reuter