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Franc loses

ground vs mark

in thin trading

PARIS: The franc lost ground against the mark this morning as the German currency gained against the dollar despite yesterday's rate cuts by the Bundesbank.

But most dealers and analysts said the franc's slide did not signal a trend and added that trading was thin.

At 1110, the franc was at 3.4343/48 against the mark after hitting a low of 3.4368 early in the morning.

After firming sharply last week, with a ten-month high of 3.4105 on August 16 in the wake of a dollar boosted by U.S., German and Japanese intervention, the franc yesterday fell below 3.43 to 3.4316/21.

"I see no particular reason for the change," said one dealer for a large brokerage.

"People are without doubt disappointed that, after the Bundesbank's move, the dollar did not hold following an initial rise when the rate cut was announced," he added.

Most traders said they were confident the Bank of France would continue to ease rates in the medium term.

But a trader at an American bank saw the franc heading down over the next six months because he expected France to fail to cut its public sector deficit and fail to meet criteria set by the Maastricht Treaty on European Economic and Monetary Union.

Another trader said he expected the franc to recover to between 3.42 and 3.43 against the mark as early as next week.

Several dealers pointed out a rise in Bunds was bolstering the mark.

"We're seeing a correction on the mark, which had fallen a great deal over the past two weeks," said one dealer.

Another said the franc's weakness could be due to Finance Minister Alain Madelin's saying yesterday that he planned to target public sector retirement packages and social benefits in next month's 1996 budget.-Reuter