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Frankfurt dollar slide

seen as profit-taking

before gains

FRANKFURT: The dollar, hit by the fallout from Friday's resignation of French Finance Minister Alain Madelin, faces a week of more losses against the mark while awaiting data on Friday needed to fuel more gains, traders said.

The U.S. currency was fixed nearly a pfennig lower at midday on Monday at 1.4685 marks, down from 1.4764 on Friday, as the mark gained from what was seen as a "flight to quality".

But despite the dollar's slippage, most dealers said it would retain in the long term the upward trend that it has had through much of the summer.

"I think the dollar still has a good chance to climb above 1.50 marks," said Ulrich Beckmann at DB Reseach, a unit of Deutsche Bank.

Some analysts said the market was eager for economic data supporting the case for a U.S. rate increase and German economic data keeping alive hopes for another Bundesbank cut -- despite views generally that last Thursday's cut by the German central bank was the last for the current cycle.

Financial markets are awaiting the release on Friday of U.S. jobs data for August for further signs of the state of the economy and clues on the chances for another rate cut by the Federal Reserve, the U.S. central bank.

"The market is really hoping for some good U.S. economic data on Friday to give the dollar another kick-start," said one Frankfurt currency trader.

"But we're also waiting to see whether we have tested the proper bottom in the dollar for this pullback," he said.

The dollar reached a six-month high at 1.4990 marks last Thursday after the Bundesbank cut its key interest rates.

But hours later it fell more than two pfennigs because of weak U.S. economic data and tumbled further on Friday after Madelin's surprise resignation.

Although the dollar recovered some losses after Jean Arthuis was named as the new finance minister, concern about French economic policies has prompted more sales of the franc against the mark, which has weighed on the dollar.

Some German traders said they expected the mark to remain within a range from 1.46 to 1.48 marks for the week, with a chance that the greenback could soon fall toward 1.44 marks.

But any move below about 1.45 marks would risk the return of central banks to currency markets in bids to underpin the dollar after the success of the last bout of intervention.

Some traders are not so optimistic about a dollar recovery, believing that near-term gains may be capped and that the dollar has run out of steam to break the 1.50 barrier.

"I don't think we are going to make it over 1.50 marks and stabilise above that level," said a Munich-based trader.

"The longer that we stay in a sideways trading pattern puts more pressure on the dollar to go lower," he said, adding that the 1.44 level would be "a critical barrier for the dollar".-Reuter