The pound has come under intensive pressure from international speculators and Irish companies. It fell yesterday by over two pfennigs to close at DM2.6188 from DM2.6371 on Friday, and dropped against sterling, closing at 91.08p from 92.40p.

Mr Jim Power, chief economist at Bank of Ireland, said the pound was sold independently of any moves in sterling. "Sterling actually strengthened on the day but we still lost against the deutschmark," he noted.

Market sources estimate that up to £150 million was sold yesterday. The falls mean the pound is only trading 8.7 per cent above the weakest currency in the system, the French franc. It is now trading at its lowest level since mid-July but is still above the recent lows achieved in April at around DM2.55.

According to Mr Power, Irish businesses are now realising that the pound is probably a one-way bet and are buying deutschmarks as well as French francs and other core euro currencies.

This realisation grew after the informal meeting of finance ministers earlier this month put a revaluation of the pound - an upward revision of its central rate in the ERM - further off the agenda. And, as has been repeatedly pointed out, even a 5 per cent revaluation would point to a trading range around DM2.60.

According to Mr Power, the pound is unlikely to fall below this DM2.60 level where it will meet serious resistance. He also noted that there was good buying interest at around 91p which may support it in the short term.

According to Mr Oliver Mangan, economist at AIB, sterling may be supported over the coming months by fresh interest rate rises, limiting the extent the pound can fall against the deutschmark.

"The market was over-hasty in writing off sterling," he said. "So sterling may stay underpinned for the next couple of months, but after that it will fall back."

He pointed to the growing realisation that the UK authorities would like to see sterling weakening, as one factor which will hasten its decline. The Governor of the Bank of England has already said that sterling was overvalued and there was the prospect of intervention. He added that the windfall gains from building society floatations which consumers had been spending would dry up over the rest of the year.

In addition, there was a growing awareness that the UK may enter monetary union after a short delay. "The authorities there would not want to enter at DM2.80 and were likely to prefer an entry rate around DM2.50 and that would weigh on the market's mind," Mr Mangan said.

Mr Alan McQuaid, economist at Bloxham Stockbrokers, warned, however, that revaluation may not be as distant a prospect as many commentators were predicting.

According to Mr McQuaid, sterling could be in for another rally as the markets realise that German rate rises will be dwarfed by further rises which will be needed in Britain.

"A lot of people are very negative but I believe there is far more scope for higher rates in the UK and the US which would boost those currencies than there is in Germany," he said.