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Dollar make new

high ahead of G7 moot

NEW YORK: The dollar on Friday recovered to set a 14-month high against the German mark ahead of a weekend meeting in Washington of the world's leading economic powers who are clearly pleased with the dollar's recent gains.

Dealers said the market took a more positive view of the German interest-rate cut Thursday, which also helped put the dollar back on an upward track. They said sentiment in the market remained generally bullish on the dollar despite Thursday's setback.

The Group of Seven leading industrialized nations meets Sunday in Washington.

The dollar closed at 1.5125/30 marks up from 1.5015/20 and at 107.30/40 yen up from 106.80/90. It traded as high as 1.5160 marks at the close.

Although exchange rates are not expected to be high on the G7 agenda, dealers said they expect any statement on currencies to express satisfaction at the dollar's rise from post-war lows over the past year.

"Any communique mention of currencies is likely to be dollar positive, but I don't expect any statement about currencies," said Brian Dolan, associate in foreign exchange at Credit Suisse. "It's not that pressing of an issue."

U.S. Deputy Treasury Secretary Lawrence Summers, asked about the dollar Friday, said G7 ministers can "take some satisfaction in the changes that have taken place since their meeting a year ago and as a consequence of their cooperation." Friday was exactly one year after the dollar plunged to a post World War Two low of 79.75 yen.

At a G7 meeting in April 1995, ministers called for an orderly reversal of exchange rates which marked the beginning of a year-long recovery for the dollar.

Dealers said large U.S. and European hedge funds bought sizeable amounts of dollars, taking advantage of lower prices.

"If you would have told people at the beginning of the week they could buy dollars at 1.4980 or 1.50 marks, their mouths would have dropped open," said Dolan.

After Germany cut its official rates by half a percent, some had sold the dollar on the view that German rates would not go any lower but would start to edge up later in the year.

Bruce English, vice president and head of institutional sales at ABN-AMRO Bank, said a closer scrutiny of comments by Bundesbank President Hans Tietmeyer Thursday convinced some that German rates would be steady to lower for a while.

"The full statement is rates are going sideways or down. There is no chance they are going up," said English. "German market rates are likely to decline," he added.

He said the fact that Germany left its key money market rate, the repo rate, unchanged at 3.30 percent leaves the Bundesbank room to ratchet market interest rates lower.

"That particularly says to the market rates are going to come down," English said.

The dollar also rose against the yen but not as robustly as against the mark.

Dolan of Credit Suisse said the dollar's gains on the yen may be limited at this stage by renewed investment interest in the Japanese economy and the potential for higher Japanese interest rates which are attracting investors.

In other trade, the dollar rose to 1.2280/90 Swiss francs from 1.2172.82 at the open. Sterling fell to $1.5141/49 from $1.5184/91. The dollar fell slightly to Canadian $1.3623/28 from 1.3631/36. The Australian dollar ended at $0.7830/35.-Reuter