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Greenback shows

strenght vs mark

NEW YORK: The dollar surged against the mark Tuesday amid fresh signs that Germany will soon lower official interest rates, traders said.

Overseas buying thrust the dollar to a 26-month high against the yen and the unit later posted a seven-month high on the mark as heavy buying continued in U.S. trade.

"The dollar has made an impressive showing. The fundamentals continue to move more in favor of the dollar and away from the deutschemark and the yen," said Stephen Flanagan, senior foreign exchange dealer at Credit Agricole.

A report showed German industrial orders sank 1.0 percent in February. Meanwhile Hans Tietmeyer, the president of Germany's central bank, or Bundesbank, hinted in a magazine interview that German interest rates could fall.

With steady U.S. economic growth seen producing flat or rising rates, currency investors swarmed to the dollar.

"We saw selling interest all the way up, particuarly from European exporters. But there was really nothing that could stop the dollar," said James Powers, vice president for corporate foreign exchange at Westdeutsche Landesbank Girozentrale.

The dollar briefly touched the 1.4990-mark high set on September 15, 1995, before closing at 1.4975/80, up from 1.4915/20 at the open. The greenback was nearly flat at 108.30/35 yen from 108.25/35 at the open.

Published comments overnight from a Japanese finance official helped lift the dollar against the yen, traders said.

Japan's Ministry of Finance director Eisuke Sakakibara reportedly urged Japanese institutions to increase holdings of foreign assets, which traders deemed a thinly-veiled appeal for a stronger dollar.

"Sakakibara is one of the most well-heeded people in Japan and it certainly didn't hurt the dollar," Flanagan said.

The huge dollar rally continued a late Monday recovery from heavy selling linked to big losses in U.S. stocks and bonds. When those markets stabilized Tuesday, investors that had sold the dollar quickly bought it back, dealers said.

"This was a strong dollar move. The buying was fairly widespread," said Stephen Jury, chief currency dealer at Union Bank of Switzerland.

The 1.50 mark level stands as a key technical barrier to any sustained dollar rally. The dollar has inched toward that level for several weeks and could explode higher if it breaches 1.50, traders said.

"The corporate community is getting nervous. If we get above 1.50 marks, they could start panicking a bit and buy dollars to hedge" foreign exchange exposure, Powers said.

Options players reportedly hold large knockout positions that trigger if the dollar touches 1.50 marks. More recent action has focused on 1.51 mark strike prices, traders said.

The mark also sold off against the yen and many European currencies, which should underpin the dollar's current rally, dealers said.

"That could make the move in the dollar a little more powerful," Powers added.

Elsewhere, the dollar rose to 1.2111/16 Swiss francs from 1.2060/70 at the open. Sterling slipped to $1.5210/20 from $1.5230/40. The dollar rose to Canadian $1.3586/91 from C$1.3545/50 at the open. The Australian dollar slipped to $0.7860/65 from $0.7865/70.-Reuter