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Dollar stays

steady in Europe

LONDON: The dollar ended little changed in Europe as London markets wound down for the long weekend and as traders assessed the impact of Thursday's Bundesbank rate cut.

Although dollar bulls are still smarting from the unit's violent retreat from the 1.50-mark barrier Thursday, wariness about fresh central bank intervention and some positive US economic data helped protect the downside, traders said.

"Dollar bulls have had to pause for now", said Neil MacKinnon, Chief Econoimist at Citibank in London. The German discount rate at 3.5 percent now looks to be the bottom for the cycle and this may be hampering the dollar's upside, he said.

At 1425 GMT, the dollar was trading at 1.4775/80 marks, down slightly from 1.4790/95 late Thursday. Against the yen, it was at 96.52/62, down slightly from 96.60/65 late Thursday.

"It tried the topside - and what won't go up must come down," said Pat Magill, head of Daiwa Europe's corporate desk, on the dollar's failure to clear 1.50 Thursday and 1.48 Friday.

Rumors of large orders for marks at Thursday's highs from German corporates kept traders wary testing those level again Friday. Still, analysts said the bigger picture still looks positive for the dollar and buying on dips is to be advised for a fresh best of 1.50 in the weeks ahead.

Part of the reason for yesterday's recoil from 1.50 was news of a shock 1.7 percent drop in the erratic US durable goods orders series in July.

But, news Friday of a robust five percent rise in US existing home sales in July to 3.99 million offset some gnawing concerns about the US economy and further Fed interest cuts.

Bavaria reported a 0.1 percent drop in its August cost-of-living index to 2.0 percent on Friday, confirming similar numbers reported by two other German states on Thursday.

While analysts remain confident the medium term uptrend in dollar/mark remains in place, meantime, there are growing concerns about the shorter-term outlook for dollar/yen.

Analysts said Japanese investors overseas may be tempted to book profits on rare foreign exchange gains clocked up recently

The desire to realise those forex gains ahead of the end of the Japanese financial half-year on September 30 could add to the regular pro-yen seasonal flows which are already associated with the Japanese accounting year, analysts said.

If dollar/yen gets hampered and dollar/mark extends its gains, then the best trading opportunity may be to sell mark/yen over the coming weeks, some traders said.

Elsewhere, the Italian lira was buoyed when budget minister Rainer Masera said current levels, about 1090 per mark, could be appropriate for talks on re-entry to the European exchange rate mechanism.-Reuter