Sterling made a sharp recovery when U.K. Chancellor of the Exchequer Nigel Lawson described remarks he made yesterday on targets for the pound as insignificant rallying back up almost exactly to the levels it had fetched before Lawson spoke yesterday dealers and analysts said. They said sterling would likely leave the limelight once again to trade quietly around current levels as the markets set their sights on the dollar yen and mark again ahead of key international monetary talks in Washington next week. Sterling ended its European day at 1.6020/30 dlrs virtually unchanged from yesterdays last 1.6040/50 dlrs fetched before Lawsons first comment. But it was well up on levels just above 1.59 dlrs which it had held until the second comment came. Against the mark sterling recovered to close at 2.9190/9240 marks after todays opening 2.9040/90 and last nights 2.9210/45. On balance it is as if nothing happened ... We are back to where we were before Mark Brett economist at securities house Barclays de Zoete Wedd said. This whole story is like a storm in a teacup a dealer with a U.K. Bank commented. The pounds recovery was triggered when Lawson criticised media coverage of comments he made yesterday when he told a conference he wanted sterling to stay roughly where it was. In this context Lawson was reported to have specified rates of around 2.90 marks and 1.60 dlrs to the pound in remarks which markets were quick to interpret as a signal to sell sterling. Lawson said today he had merely stated yesterdays approximate value of the pound. The wrong end of the stick was picked up he told reporters adding his comments did in no way signal a change in British exchange rate policies. Dealers and analysts said the reactions to both statements were clear evidence that the market frustrated by the relative currency stability after the February 22 Paris agreement was desperate to reactivate trading and would react to any clues offered about the contents of the currency accord. In Paris finance ministers of the Group of Five and Canada are widely believed to have agreed exchange rate targets although no participant has specified these in an apparent bid to foster stability by keeping markets guessing. The markets are absolutely desperate to get clues on Group of Six (countries that are part to the Paris agreement) targets ... The number of rumours flying around is bigger than ever before said Barclays de Zoete Wedds Brett. Analysts said neither yesterdays remarks nor todays had changed their impression that after Paris sterling was targeted to trade in broad ranges against major currencies. All polled analysts said if anything the 2.90 marks level mentioned by Lawson was probably the centre of a wide 20-pfennig range which sterling would easily hold helped by good economic indicators and relatively high interest rates. It would be insane to pinpoint an exchange rate ahead of an election ... I dont believe Lawson is mad enough to tie himself to a fixed rate Brett said. He expected sterling to firm over the next few weeks to around 2.95 marks and 1.63 dlrs as overseas investors reappraised high-yielding investments here. Robin Marshall chief economist at Chase Manhattan Securities said he was not surprised to see Lawson qualify his sterling target comments so quickly. His remarks gave markets a target to aim at he said adding He (Lawson) talked himself into a bit of a corner on this ... It made him a hostage to fortune. Marshall and other analysts dismissed a theory that by quoting target rates Lawson had attempted to put pressure on prime Minister Margaret Thatcher to agree to British membership of the European Monetary System (EMS) as implausible.
STERLING REBOUNDS ON LAWSON "TARGET"-DENIAL