The pound has remained under pressure on the currency markets, slipping below DM2.50, its lowest level against the deutschmark for more than a year, but managing to stay at around 84p sterling.

The Irish currency ended the day at DM2.4969, down three pfennigs, as selling pressure nudged the pound closer to its central rate DM2.41, the rate at which it is expected to join the single currency. A weaker sterling also helped to keep the pound trading at around 84p for most of the day. It dipped to 83p in early trading but was able to recover to lose just over half a penny on the day. The pound lost further ground against the dollar, dropping another two cents to $1.3656 in late trade.

Analysts suggested that there were some signs that things were beginning to settle down, with the return of some buying of the Irish currency during the day providing support. But they warned that further drops in the value of the currency cannot be ruled out.

"While things have settled down a bit, we need to see some response from the authorities over the next few days, otherwise the markets will have another go at the pound," said NCB economist, Mr Dermot O'Brien.

The bulk of the buying activity was said to be from the corporate sector, while there was also a trickle of interest coming from investors in London, a sign that they believe the currency may not fall much further for the time being.

"Some investors may be wary of selling below the DM2.50 level. And they will be aware that it's not a one-way bet that the pound will enter the single currency at its central rate of DM2.41," Mr John Beggs, AIB economist added.

Others suggest the pound may still have some way to go against the deutschmark, possibly reaching DM2.45. At these levels, it would be trading very close to its central rate and would attract more buyers into the market. It could slip as low as 83p sterling.

The pace at which it moves down against the German currency will create pressure for a fall in Irish interest rates. The Central Bank has indicated its resistance to such a move in the short term, amid fears of fuelling inflation. But the closer the pound gets to its central rate, the faster Irish interest rates will fall.

Key money market rates in the Dublin market remained steady yesterday but a flow of funds into the currency would force rates down, triggering a drop in mortgage and other interest rates. On the international markets, the dollar slipped against the yen, shedding the gains it had made earlier in the week as investors feared concerted central bank intervention to brake the yen's decline. The market was closely watching yesterday's meetings in Washington of the Japanese deputy finance minister, Mr Eisuke Sakakibara, and American officials.