950816

Dollar falters on profit taking

LONDON: Profit-taking wiped some of the shine from the dazzling dollar by the European midsession, but analysts said its bullish tone remained untarnished. "It's been such a rapid move that we're bound to see some consolidation and profit-taking, but I'd expect to see the rally continue," said Thomas Rayner, international economist at Societe Generale Strauss Turnbull.

The Bundesbank's decision to leave its repo rate unchanged at 4.45 percent rattled the dollar slightly, but the market's thirst for the U.S. currency was undiminished, analysts said.

Recent Bundesbank comments had sparked talk of a repo shave, but that speculation ebbed as money market liquidity grew thin.

The German central bank drained a net 100 million marks from the market today, denting the dollar slightly, analysts said. It accepted bids for 63.0 billion marks of the 14-day repo funds, while a pact for 63.1 billion marks at 4.50 percent expired.

By 1025 GMT the dollar was trading at 97.50/60 yen. That was higher than Tuesday's late European level of 96.72/77 but well off the six-month peak of 99.05 it hit in Asia overnight.

Dollar/mark was quoted at 1.4744/54, down from an earlier high of 1.4930. It closed in Europe at around 1.4747/52 Tuesday.

Dollar/mark was safe for now so long as it stayed above 1.4725, said a senior trader at French bank in London.

"This is a fair bit of retracement. If we come down through 1.4725 you could be looking at 1.4620," he said.

But dollar/yen remained the prime mover, and market watchers were unruffled by the prospect of a period of consolidation which they believed could usher in a near-term move to 100.

A break back above 98.60 yen would re-establish upward pressure on the dollar to its overnight 99.05 peak, with a breach there targeting 100 and 101.45, technical analysts said.

U.S. July housing starts are scheduled for release at 1230 GMT, but are not expected to excite the market greatly.

June trade data due tomorrow are more likely to attract interest, but players are seen shrugging off a weak number in their desire to buy dollars.

The U.K. released a mixed bag of economic data, showing unemployment rising, retail sales growing and the public sector deficit smaller than forecast.

Sterling/mark -- already strong -- slipped a touch after the data appeared, and remained weak on the dollar. By 1118 GMT it was quoted at $1.5510/20 versus $1.5530/37 in late Europe on Tuesday.

The mark was sharply down from late on Tuesday's levels on the European crosses, although short-covering hauled it out of its troughs.

The Swiss franc was virtually unchanged at 1.2270/80 per dollar.-Reuter