THE tensions surrounding monetary union have continued to benefit sterling on the foreign exchange markets, and the strength of the British currency has lifted the pound further against the other ERM currencies.
The Irish currency stood 10 per cent above the core monetary union group surrounding the deutschmark late yesterday in the ERM band, as it continues to rise in sterling's wake.
The markets were yesterday digesting reports - rejected by Rome - that Italy was to be offered a special deal allowing it to entry monetary union in 2000 or 2001, but not in the initial wave in, 1999.
This continued to boost the British currency, which is being seen as something of a safe haven against single currency nerves.
The idea of late entry into monetary union was rejected by the Italian government, while the European Commission insisted it was not examining any compromise plan that might delay entry into economic and monetary union.
A Commission spokesman said there would be no prejudging of, membership in a single currency and that the decision of which countries were in would be taken in early 1998.
The spokesman reiterated that the Commission expected a "significant number" of countries would join a single currency in the first wave.
The decision would be made in light of the Maastricht treaty - "the treaty, the whole treaty and nothing but the treaty", he said.
However, some EU and banking officials were privately confirmed the plan was under consideration and the Financial Times reports today that the plan has been canvassed in Germany, the Netherlands and among central bankers for the past six months.
The idea of delayed entry is being driven by the fear that, if countries without a record of, sound public finances and exchange rate stability join EMU early, they could undermine the European Central Bank and weaken the euro. Spain and Portugal also reiterated their intention yesterday to qualify for the first wave of currencies moving to EMU.
Nevertheless, sterling rose sharply on the markets, reaching a 52 month high against the yen.
It also rose over three pfennigs against the mark and was up over a cent against the dollar. The pound followed sterling, gaining over two pfennigs against the mark to more than DM 2.64 and falling slightly against sterling to 98.26p.
Market nerves after the monetary meeting between the Chancellor Mr Kenneth Clarke and Bank of England governor Mr Eddie George also pushed the pound higher, traders said.
The lira and Italian bonds both rose slightly yesterday, on the grounds, market strategists said, that Italy seemed to be guaranteed entry into EMU, albeit at a later date. After an initial fall, the lira closed L1.7 higher against the DMark at L985.1.
