Irish punt remains under ERM pressure

The Irish punt remained under severe pressure in the European exchange rate mechanism yesterday, with dealers confident that the incoming coalition government will soon yield to pressure for a devaluation.

The punt was fully stretched in the system, 2.25 per cent below the strongest ERM currency, the Dutch guilder.

Some dealers said the punt could be devalued as early as this weekend, although most believe the EC monetary committee will meet to agree a realignment in a week's time.

But the Irish finance ministry is holding out. 'We are not seeking a realignment of the system. We are also firmly against the unilateral devaluation of the punt. We just do not want to go down that road,' a spokesman said.

Thursday's reduction in the German repo rate appeared, however, to have relieved the pressure on the French franc.

The currency remained around 3 pfennigs above its floor in the system.

Dealers concluded from the German repo move that the key Lombard and discount rates may be cut next month.

The Bundesbank's representative at the German embassy in Paris said on French radio that 'we just need to wait a few more weeks or maybe two months before the Bundesbank can really cut its leading lending rates'. But the Bundesbank in Frankfurt said later that the comments were 'not authorised'.