THE pound has continued to ease against sterling, closing yesterday at 103.10p from 103.28p a day earlier. Analysts said that any move to just below 103p would be seen as a good buying opportunity for Irish exporters.
Benefiting from sterling's rise, the pound continued to gain against the deutschmark, rising by more than a pfennig to DM2.3943. Having been the weakest currency in the ERM for some time, the pound is now three places off the bottom of the table. It is also well within the old 2.5 per cent "narrow" ERM band.
The Danish krone and French franc both closed below the pound in the grid. The franc lost ground after active buying of the June deutschmark/franc future at the Dublin Finex exchange. Finex dealers said almost DMI billion of the contracts were exchanged.
Mr Pat O'Sullivan, economist at AIB, said the pound fell back on heavy sales of Irish bonds out of London early in the day.
It was inevitable that after all the foreign interest in Irish bonds over the last few weeks we would see some profit taking," he said.
As the investors sold the bonds they converted the money into sterling, putting pressure on the pound he said. However, it is expected to be only a short term aberration and Mr O'Sullivan expects the pound to soon begin heading upward.
Dr Dan McLaughlin, chief economist at Riada Stockbrokers, also pointed out that many investors now believe the British market is cheap. "Last week 10 year British gilts were trading 1.85 points over 10 year German government bunds," he said. "That has now fallen by 0. 15 of a point as dealers decide it looked cheap.
The dollar and bond markets gained strength after soft US producer price data. The data also pushed European bond markets higher during the afternoon and led to strong gains on Wall Street which knocked on to European equity markets. US April PPI rose an overall 0.4 per cent.
The Irish benchmark 10 year bond closed at 102.20 to yield 7.53 per cent from 7.59 per cent a day earlier. The benchmark five year 8 per cent bond closed at 104.15 to yield 6.75 per cent from 6.84 per cent.
