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Dollar ends at new

high versus mark

NEW YORK: The dollar ended at its highest level in more than 14 months on Tuesday against the German mark, which continued to fall on talk that Italy would rejoin Europe's Exchange Rate Mechanism within weeks.

The U.S. currency ended at 1.5215/25 marks, its highest closing level since it ended at 1.5212 marks on February 13, 1995, traders said.

The dollar's rise was partly a byproduct of a selloff in the mark against the yen, the lira and other European currencies. "The mark is just generally soft across the board," said Brian Hunter, chief trader at ABN-AMRO Bank.

The dollar opened at 1.5194/99 marks and scaled past the psychologically important level of 1.52 as traders sold the German currency across the board.

The perception that Japanese interest rates have hit bottom and expectations of lower German rates after the Bundesbank left the repo rate unchanged last week saw the mark slump briefly to a four-month low of 70.06 yen.

The mark/yen managed to end off its low at 70.10 but traders said a break below support around 70.00 yen was in the cards and further declines to the 68-69 level were likely.

Sunday's victory in Italy's general election by the center-left Olive Tree coalition and the new government's plans to put the lira back in the ERM currency framework continued to weigh on the mark, analysts said.

"The underlying thing that's going on is a shift in the haven status of the mark," said Anne Parker Mills, a foreign exchange analyst at Lehman Brothers.

Italy's intention to rejoin the ERM raised confidence that the European Monetary Union planned for 1999 and the spawning of a common European currency would become a reality, sending mark/lira to an 18-month low.

A pan-European currency is generally viewed as negative for the mark -- regarded as Europe's premier hard currency -- because it would fuse the German currency with those of its economically weaker neighbors and potentially undermine Germany's economy.

"If you assume the EMU will take place on time, that makes the mark less attractive as a safe-haven asset," Mills said.

Speculation of Italy rejoining the ERM pushed the mark lower against the Italian lira, which spilled over into selling of the German currency against the dollar and the Japanese yen, traders said.

Analysts said the fiscal discipline required of Italy to rejoin the ERM coupled with high Italian interest rates made the currency attractive to investors.

In other trading, the dollar closed firmer against the yen at 106.67/74 against its opening level of 106.55/65.

The dollar's gains against the Japanese currency were curtailed, however, as Japanese exporters sought to sell dollars at around 106.80 yen, traders said.

"I don't think dollar/yen's potential is that high," David Ogg, foreign exchange manager at Midland Bank, said.

"There are more natural sellers in dollar/yen than there are in dollar/mark. It's not moving as quickly and people get nervous quicker," he said.

The dollar also closed higher at 1.2333/43 Swiss francs compared with an opening level of 1.2292/02. The greenback was Canadian $1.3620/25 against $1.3614/19.

Sterling rose to $1.5161/69 from $1.5120/30.

The Australia dollar ended at $0.7898/03.-Reuter