THE pound has risen to its highest level for more than three years against the deutschmark and is now by far the strongest currency in the ERM band. The Irish currency is being dragged up against the other ERM currencies by the strength of sterling, which gained further ground yesterday and is expected to remain in demand next week.
The pound again ended just above parity with sterling, with some market sources seeing modest Central Bank buying of the currency. However, the Bank appears to have put a floor at parity for the moment.
This has meant that the pound has risen strongly against the other ERM currencies, now standing over 5 per cent above the weakest currency and 4.3 per cent above the deutschmark.
The Bank would probably prefer the pound to be within 2.25 per cent of the other ERM currencies - the levels set by the old ERM band. However, fearing inflationary pressures if the pound drops below parity against sterling, it has allowed the currency to rise along with sterling against the ERM currencies.
Yesterday the pound traded late in the day comfortably over DM2.51. It has also risen in recent days against the dollar, closing 0.3 of a cent stronger at $1.6641 yesterday.
