The pound has sunk to fresh lows against the deutschmark, but has steadied against sterling and the dollar as both currencies slid amid rumours that the Bundesbank had intervened to sell sterling yesterday.

After firming to a high of DM2.5010 in morning trade, the pound came under pressure against the rising deustchmark in the afternoon and closed at DM2.4812, down a pfennig and a half and at its lowest levels in 14 months.

It settled just below DM2.48, at DM2.4798, in late trading.

Dealers said the Irish foreign exchange market remained very nervous and tension was likely to increase ahead of the weekend, as the usual market rumours of an imminent revaluation of the pound's central ERM rate did the rounds.

"We could see some buyers coming in as the weekend approaches but I don't think a revaluation is going to happen," one trader said.

Revaluation speculation usually mounts on Fridays because in the past EU finance ministers have opted to change currency values at the weekend, when the markets are closed.

Bank of Ireland economist, Mr Colin Hunt, also believes the odds are against any change to the pound's ERM central parity of DM2.41. "The probabilities are distinctly in favour of no revaluation," he said.

Many in the market believe the pound could run into renewed selling pressure next week if there is no move by the Minister for Finance to suggest that he wants the pound to join the single currency at a rate above DM2.41.

They say the pound could drop to DM2.44-DM2.45, levels - not far above its DM2.41 central rate in the ERM.

But Mr Hunt believes the pound may have found a temporary floor around DM2.48 as many of those who have sold the currency heavily in recent days opt to take their profits.

Where the pound goes against sterling depends on the direction of sterling/deutschmark in the coming days.

The British currency took a battering yesterday, dipping by more than 1 per cent to its lowest level in nearly three weeks against the deutschmark, amid talk that the Bundesbank sold sterling in a commercial transaction.

Meanwhile, comments by US Federal Reserve Board governor, Mr Laurence Meyer, that the dollar's rise was greater than the fundamentals warranted caused the US unit to yield ground to the deutschmark.

As a result, the pound perked up against both currencies and ended the day at 84.53p and $1.3668.