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Italian lira surges

through key level

against mark

MILAN: The Italian lira hit a six-month highs against the German mark on Wednesday after bounding through a significant barrier at 1,100 to the mark.

"The trend is likely to continue," said one trader at a U.S. bank in Milan. "Mark-lira is staying below a very important long-term trend line at 1,120."

Dealers said the lira could push up as far as 1,050 in coming weeks, the level at which economists say the currency could rejoin the European Union's exchange rate mechanism (ERM) of semi-fixed exchange rates.

The lira fled the ERM in a currency crisis in September 1992 and has floated freely on the foreign exchanges ever since. But the government has said it wants to re-enter the ERM this year.

The Italian unit has appreciated seven percent against the mark since mid-July when it was trading at 1,176.50 and 14 percent from its historic low of 1,275 set on March 17.

It touched a peak of 1,092.00 per mark on Wednesday, a level unseen since late February.

Dealers said the break came in U.S. trading time on Tuesday, when Italian markets were closed for a holiday. Joint central bank intervention to boost the dollar helped strengthen the lira against the mark.

The lira is one of several high-yielding currencies attracting buyers at present, but dealers have reported plenty of investor interest specifically in the volatile Italian currency in recent weeks.

Confidence in Italian markets has risen as a result of parliament passing a key pension reform law aimed at cutting 100 trillion lire ($61.8 billion) off the budget deficit over the next 10 years.

A calmer political situation over the summer months has also contributed to the rally along with the seasonal effects of tourism.

The lira was firm against the dollar at 1,618 per dollar from 1,620 in early trade. But it has weakened from levels seen earlier this month when it touched 1,563.75, its highest level against the U.S. currency since November last year.-Reuter