Franc keeps on climbing against the mark

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The Independent Online
THE FRENCH franc continued its recovery against the mark yesterday, as dealers indulged in a bout of profit- taking. It had climbed to Fr3.4550 to the mark by the close, up about three centimes on the day but still below its old floor of Fr3.4305 in the exchange rate mechanism.

As it did so, Gunther Rexrodt, the German economy minister, denied that France's problems in the ERM were the fault of Germany.

Mr Rexrodt warned France 'against the risk that it puts the responsibility for its own problems on to others' in an interview in Le Monde newspaper. 'I do not think the relatively high interest rates in Germany until a year ago prevented France from solving its own problems,' he said.

Despite the slight reduction in the German 'repo' rate on Tuesday, there is no sign yet of the French easing their rates. Economists believe the French, Danish and Belgians are all reluctant to be the first of the three countries to cut rates and see their currencies fall. Spain and Portugal have already cut rates.

'I think the ERM problem is in danger of repeating itself first as tragedy and then as farce unless these countries act decisively to revive their economies,' said Nick Parsons, of Canadian Imperial Bank of Commerce.

The Bundesbank accepted a rate of 6.7 per cent on a 28-day securities repurchase agreement, which dealers took as further evidence that the official discount rate will be cut from 6.75 per cent later this month.

But in London the FT-SE 100 fell 3.7 points to 2,941.3 as hopes of a UK rate cut faded.