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Dollar stable in

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LONDON: The dollar was steady in early Europe as the market tried to swallow its disappointment that Thursday's aggressive German rate cuts had failed to ignite a convincing rally.

"We've seen some good gains in recent weeks and people are just trying to reappraise the situation," said Ian Harnett, chief economist at Societe Generale Strauss Turnbull.

The Bundesbank's half-point slices off the discount and Lombard rates sent the dollar briefly whizzing to six-month mark highs yesterday before profit-taking and a shock drop in U.S. July durable goods orders sparked a sharp retreat.

The dollar was trading at 1.4779/89 marks and 96.70/75 yen at 0743 GMT, compared with 1.4794/99 and 96.60/65 in late Europe on Thursday. The U.S. unit shied at a 1.4990-mark intraday peak yesterday, just short of the psychological 1.50 barrier.

"I still feel the dollar's going to go better -- not immediately, but it's going to go better," said Gerard Lyons, chief economist at DKB International here.

The dollar is caught in a vicious circle as long-term investors keep their hands in their pockets while they anxiously assess the currency's prospects. That in turn is endangering its potential for sustained gains, analysts said.

"A lot of longer-term investors still distrust the dollar, and that's preventing a lot of people going in there and aggressively buying just yet," said Lyons.

While the dollar is trading in ranges significantly higher than those of just a few weeks ago, the lack of long-term flows is robbing it of the momentum to scale the psychologically important 1.50 marks and 100 yen obstacles, he added.

Chartists predict a period of range-play, with traders buying on dips, before the dollar tests the upper end of its recent range next week. Dollar/mark may dip as low as 1.4650 before recovering if support at 1.4740 crumbles, they say.

Central bank intervention remains a big fear -- and a real possibility -- and that should protect the U.S. unit's downside, analysts said.

The market was on the lookout for concerted action yesterday as the dollar neared 1.50 marks, with many feeling that would be an ideal time for the authorities to give a helping hand.

If traders shorted dollars aggressively now, central banks could storm in to squeeze out the bears, analysts said.

On the data front, U.S. July existing home sales are due at 1245 GMT. The market consensus is for 3.84 million, slightly higher than June's 3.78 million.

A strikingly weak figure could knock the dollar as it would focus the market's attention on the possibility of U.S. credit easing, analysts said.

Elsewhere, the Swiss franc was stronger, at 1.2190/00 to the dollar compared to late Thursday's 1.2218/25.

Sterling was little changed at $1.5407/17 versus $1.5403/08.-Reuter