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Mark steady in Europe

LONDON : The mark steadied in late Europe as other Euro-currencies paused for breath after comments by Bundesbank council member Zeitler, but analysts say the downtrend in the German currency remains intact.

Franz-Christoph Zeitler told a news conference in Munich that the mark was no longer overvalued against other European currencies, but it was still overvalued against the dollar.

"The news we've seen in the last few days has all been fundamentally good for the non-mark currencies," said James Shugg, economist at Westpac. "I would not be surprised to see the mark drift lower against other Euro-currencies."

Earlier today Bank of France slashed the emergency five-10 day lending rate to 4.90 percent from 5.50 percent but left the key intervention rate unchanged at 3.70 percent.

Analysts said given the 50 basis point cut in official German interest rates last week by the Bundesbank, the decision by the central bank to leave the intervention rate unchanged was surprising.

"They should have cut the intervention rate as well, they had room for it and the economy needs it," a dealer said.

After hitting a 33-month high at 3.3732, the mark recovered to 3.3783/88 versus the French franc by late afternoon.

Prospects of greater political stabilty and the urgency of the campaign to return the Italian lira back to the European exchange rate mechansism by an expected centre-left coalition government continues to propel the lira up.

The lira has a lot more upside to go but some profit-taking and retrenchment are inevitable near term, analysts say.

The lira was a touch easier at 1020.75/1.25 versus the mark at 1412 GMT after setting an 18-month high at 1017.00 earlier.

Elsewhere in Europe the Swedish Riksbank today lowered its short-term interest rate corridor by 3/4 of a percent in a move that paves the way for pruning the key 6.9 percent repo rate.

The move by the Riksbank had been widely expected by analysts after it lowered the repo rate by 25 basis points on Tuesday.

By late afternoon the mark clawed back to 4.4425/55 versus the Swedish crown after an early low at 4.4130.

Another major beneficiary of negative mark sentiment was the Spanish peseta.

Along with the lira it travelled up to an 18-month high todayt at 82.80 on perceptions of a more stable political background. At 1425 mark/peseta was trading at 82.93/98.-Reuter