The pound has regained some of its losses against the deutschmark after sterling sentiment was strengthened by a much better than expected employment report. The Irish currency closed at DM2.6525 in late trading from DM2.6428 on Tuesday. It fell slightly against a firmer sterling, closing at 93.50p from 93.81p. Some traders said there was little activity and that the currency simply bounced along behind sterling with most of the selling seen after the weekend EU finance ministers meeting halted for the day.

Allusions to a pound revaluation from Bundesbank council member, Mr Ernst Welteke may also have supported the currency. Mr Welteke, answering reporters' questions, said any revaluation of the pound would not be a problem for the German economy and would not pose any risks for Ireland in qualifying for monetary union.

Nevertheless, many analysts here remain convinced that a revaluation of the pound's central ERM rate is not a realistic proposition and the Germans are simply pointing out that it is allowed.

The D-mark also gained initially on comments from Mr Welteke. He told reporters that all the German inflation indicators were going in the wrong direction. His comments increased expectations that German interest rates would have to rise.