STERLING has fallen sharply against the deutschmark after reported comments by the deputy governor of the Bank of England that the currency is overvalued. The comments which Mr Howard Davies later denied added to market nervousness about the British general election.

As a result sterling fell over three pfennigs to DM2.7115. The pound followed easing to DM2.6500 from DM2.6616 a day earlier. The pound also made some ground against sterling, but failed to climb above the 98p barrier. It closed at 97.70p from 97.22p the day before.

The moves help the pound's position in the ERM grid. It is trading at 10.25 per cent above the weakest currency in the grid from more than 11 per cent a couple of weeks ago.