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Dollar stalls in Europe

LONDON: The dollar stalled against the mark and yen here as traders' preoccupation with central banks shifted from last week's concerted intervention to policy- making meetings at the Federal Reserve and Bundesbank this week.

Although neither central bank is expected to alter official interest rates, analysts said any surprise is more likely to come from the Bundesbank in the form a rate cut. That is likely to underpin dollar/mark until Thursday's council meeting.

"Although we're not expecting a German cut this week, the outside chance is still there and the repo could slip quite sharply," said Adrian Schmidt, economist at Chase Manhattan.

At 1505 GMT, the dollar was trading at 1.4718/23 marks, up from 1.4699/06 late Friday. Against the yen, it was at 96.60/70 compared with 96.85/95.

"The dollar began to consolidate at the end of last week and really remains in that phase," said Richard Turnill, international economist at Banque Paribas in London.

Still, Schmidt at Chase said the Bundesbank's key securities repurchase rate could fall by between five and 10 basis points from the current 4.50 percent at this week's tender, egged on by ample liquidity in the money market and a soft German call rate.

The latest German economic data support the easing argument.

West German June industrial orders dropped 1.7 percent from May and the German research institute Ifo said its industrial confidence index fell to 97.5 in July from 99.0 in June.

Ifo chief economist Gernot Nerb told Reuters Financial Television, meantime, that the institute still expects the Bundesbank to cut official rates by the end of September.

The data slate in the U.S. this week, however, is thin on the ground and July durable goods orders on Thursday is the only report of note. Analysts polled by Reuters forecast a 0.8 percent rise in orders during the month.

With summer holidays still affecting volumes, however, much of daily trading is likely to be dictated by chartists. They are unconcerned about the dollar's retreat from last week's highs and say a brief correction is necessary to extend the uptrend.

The pound dropped more than a pfennig from the day's highs to close here at 2.2665 marks, although it was little changed from Friday's close.

Traders said the pound's weakness against the dollar is a concern but, providing that holds up for now, sterling should push higher again against the mark when the dollar resumes its rise. -Reuter