THE Central Bank has again intervened heavily in the foreign exchange markets in another attempt to push up the pound against the deutschmark.

The Central Bank buying pushed the pound above 104p against sterling for the first time since the currency crisis of late 1992 and early 1993, although it eased slightly in late trading. It follows smaller scale buying by the bank on Monday.

Sources estimated that the Bank spent up to £25 million yesterday buying pounds on the market. Last week, the Bank spent an estimated £15 million in one day after the pound fell from the top to the bottom of the ERM grid. Last night, the pound remained third from the bottom, above the Danish krone and the French franc.

Analysts said it had now become clear that the Central Bank was effectively pursuing a 1 per cent target band around the D-mark. The Bank is said to be worried that excessive volatility against the D-mark could jeopardise Ireland's chances of qualifying for the single currency in 1998.

The pound closed at 103.87p against sterling in late trading, having traded as high as 104p earlier in the day. It also closed at DM2.4010, after hours, from DM2.3928 a day earlier. The pound's central rate against the mark is DM2.4110, and a 1 per cent band would imply a floor of DM2.3870. Some analysts believe that the pound could now rise as far as 104.25p as it has broken the "psychologically important" 104p barrier.

The key guide to currency movements this week will be the Bundesbank. Analysts believe that if it doesn't cut the German money market rate tomorrow as expected, the D-mark could be significantly strengthened and the pound could fall further against the German currency.

However, a cult could lead to some recovery in the dollar which would also benefit sterling. The dollar will also be reliant on equity markets.

Sterling reserves at the Central Bank were at an all time high of £5.1 billion at the end of May, the most recent date for which figures are available. June data will be released in the first week of August, which will give a good indication of how much the Bank spent that month.

One dealer, who asked not to be identified, said the Central Bank was engaged in a "smoothing out" operation. "If they see someone selling they will come ink and buy," he said.

One reason the Bank does not like its intervention to be made public is that speculators could then be encouraged to come in and sell the currency, knowing there is a ready buyer.

Exporters have been very vocal recently, warning that a continuing high rate against sterling could have dire consequences for jobs. However, analysts said that many took the opportunity a couple of weeks ago when the currency fell to 102.50p to book sterling up to three months head.

"It will only be if we remain at these levels that exporters will start to suffer," said one analyst. "It is also very good news for importers," he noted.

At the same time, the Bank is continuing to keep conditions very tight in the interest rate market. The key one month money market rate is still at 5.44 per cent. Traders said the strength of the pound should have allowed the money rates to ease back.

"There must be a body of opinion in the Bank pushing for higher rates they are probably concerned about the June credit numbers," one analyst said.