960423

Dollar fails to maintain

its enging trend despite

ballish comments by G7

NEW YORK: The dollar ended easier on profit-taking on Monday after bullish comments by the Group of Seven industrialized nations propelled U.S. currency to a new 14-month high of 1.5199 marks overnight, traders said.

However, the focus was on selling marks for yen, lira, and other currencies on comments by European officials indicating a desire to see the dollar rise against European currencies and on continued expectations for low German interest rates.

"This is mostly a continued story of mark weakness against other currencies," Dan O'Connell, vice president of institutional foreign exchange at First Chicago NBD, said.

The dollar closed at 1.5165/75 marks down from an opening of 1.5175/85 and at 106.55/65 yen against 106.68/78.

Meeting in Washington on Sunday, finance ministers and central bankers from G7 countries welcomed the dollar's recovery from record low levels a year ago.

Bundesbank president Hans Tietmeyer said he wanted to see a continuation of recent currency trends, while French Finance Minister Jean Arthuis said on Monday he believed the dollar had potential to rise more against European currencies.

Mark/yen slipped briefly to a four-month low of 70.19 in the wake of the comments, but recovered some to end at 71.27.

"The call is really for a weaker mark rather than a stronger dollar," James Kemp, chief dealer at Citibank, said.

Germany has made it clear that it wants a stronger dollar against the mark to help the German economy recover by helping to make German exports more cost-competitive.

The mark is particularly vulnerable against the yen due to perceptions that Japanese interest rates have struck bottom while German rates still have scope to soften, traders said.

The Bundesbank last week cut its Lombard and discount rates by 50 basis points but left the repo rate unchanged at 3.30 percent.

"This is a continuation of a trend we saw toward the end of last week. That is, expectations of lower interest rates in Germany...and expectations of a slightly improved situation in Japan and slightly higher rates there," O'Connell said.

Bank of Japan Governor Yasuo Matsushita said in Washington on Monday that Japan is experiencing a moderate economic recovery. Matsushita also noted that Japan's discount rate is now at a historic low of 0.5 percent.

The yen's strength against the mark on widening interest rate differentials has undermined the dollar's strength against the Japanese currency, traders said.

The mark also continued to show weakness against the lira after Italian left-wing leader Romano Prodi said he would seek European exchange rate mechanism entry for the lira "as soon as possible" after his party won Sunday's general election.

Mark/lira slipped to around 1023 in late New York trade from 1042 late on Friday.

The dollar closed at 1.2285/88 Swiss francs against 1.2275/85. It was Canadian $1.3626/31 versus 1.3619/24.

Sterling was little changed at $1.5120/30 against 1.5122/32. The Australia dollar ended at $0.7865/70.-Reuter