EXPORTERS have warned of job losses if the pound remains above 103.5p sterling for a prolonged period.

Such a prospect now appears increasingly likely, with the pound closing at just under 104p sterling last night, as analysts warned that it may have moved into new trading range of 103p to 104p from its previous range of 102p to 103p.

The pound was at 103.9p sterling in Dublin yesterday evening and 2.3898 deutschmarks.

The Irish Exporters Group (IREX) has described the situation as "critical" for firms that source raw materials locally but sell in the British market. "These firms are suffering from the pincer effect of sterling type interest rates and an appreciating Irish pound," according to Mr Frank Mulcahy, director of the organisation.

The Irish Exporters Association has said exporters "are bearing the brunt of our currency policy". The chief executive of the association, Mr Colum MacDonnell, repeated his claim of earlier this week that it was not only exporters to Britain which were suffering.

"A basket of currencies reflecting the main volume of Irish exports to Europe would now be showing a 2 per cent increase in the value of the Irish pound since the start of the year," according to Mr MacDonnell.

Job losses will be inevitable unless there is change in the Government policy of shadowing the deutschmark and the consequential appreciation against sterling, he says.

The outcome of next Thursday's Bundesbank meeting could be crucial in determining the short term direction of the pound/sterling exchange rate, according to Mr John Beggs, economist with AIB Capital Markets.

Money supply figures for Germany released yesterday raised the prospect of a rate cut, he explained. A cut in German rates would limit the strength of the D-mark and allow the dollar and sterling exchange rates with the German currency to stabilise around current levels, he said. This would indicate a level for the pound against sterling of between 103p and 104p sterling.

Although such levels will put further strains on exporters, which have warned of possible job losses, the Government is expected to maintain its strategy of supporting the pound against the German mark.

Earlier this week, the Central Bank spent £15 million buying pounds in order to limit the extent to which the pound slipped against the D-mark in company with sterling and the dollar. The fall in the dollar was triggered by the sharp dip in international equity markets earlier this week, led by Wall Street, after disappointing results from a number of high technology stocks.

The Central Bank is keen that the pound not be seen as a satellite of sterling in the run up to EMU.

The Bundesbank said yesterday that German M3 money supply grew at an annualised rate of 9.6 per cent in June compared to a 10.5 per cent rate in May, raising hopes the slowdown may prompt a cut in the key money market rate soon.

Lending to the private sector, which had buoyed M3 growth in previous months, declined in June although lending to the public sector was lively, the Bundesbank said.

"There is now no obstacle for the Bundesbank to go ahead with a 10 to 15 basis point repo-rate (the main money market rate) cut week," said Mr Holger economist at Merrill lynch Frankfurt.

Although M3 rates have consistently outpaced the central bank's to 7 per cent target corridor this year, economists believe Bundesbank chief economist, Mr Otmar Issing's prediction that the target will not be altered at the review.

"The Bundesbank looks more at the economy and inflation rates, and anecdotal evidence suggests the council is moving away from its strict adherence to the M3 numbers," Mr Thomas Mayer, senior economist at Goldman Sachs in Frankfurt, said, adding there was no need to change the target.

Bundesbank president, Dr Hans Tietmeyer on Tuesday said the council was keen on keeping interest rates steady as long as possible or even lowering them, if monetary conditions allowed.

The main money market rate has been fixed at 3.30 per cent since February even though the discount and Lombard rates were slashed by 50 basis points to 2.5 and 4.5 percent respectively in late April.

Although M3 growth has slowed consistently since February, it remains above the central bank's target corridor of 4 to 7 per cent.