THE dollar soared to new peaks against the deutschmark and the yen yesterday, triggering a rally on European bourses as investors anticipated bigger profits among exporting companies.

Stocks in Paris, Frankfurt and London closed with healthy gains as the US currency chalked up a three year high against the deutschmark and touched a 56 month peak against the yen.

In Dublin share prices benefited from the positive international sentiment and the ISEQ index ended 23 points higher 2991.30.

The dollar drew strength from widespread expectations of another rise in US interest rates and the deutschmark came under pressure from recent data indicating little likelihood of a near term rise in German interest rates.

The pound rose by a pfennig against the German currency to DM2.6649. Against sterling it was little changed at 95.41p, while it fell slightly against the strong dollar to $1.5480. The deutschmark was also undermined by growing talk that flexibility in interpreting the Maastricht criteria would see the European single currency go ahead on time. That is seen as bad news for a robust currency like the deutschmark.

The dollar had climbed to DM1.7250 in late European trade, up over a pfennig on Tuesday's deals and its highest level since April 1994. But some traders were getting cold feet about the chances of more rapid advances.

Expectations of higher US interest rates also drove the dollar up against the yen. It was trading at 126.83 yen late in the session, up over half a yen on Tuesday and at its highest level since August 1992.

Sterling was lifted by the dollar's rise and a strong bond market in Europe, climbing to DM2.7947 in late trade compared with DM2.7775 on Tuesday.