THE pound has fallen further against sterling and analysts believe that the British currency 1st set to rise further.

At the close of business yesterday the pound was trading at 101.17p sterling from 101.38p a day earlier. At the same time it eased against the rallying deutschmark to DM2.4646, from DM2.4711 the previous day.

Sterling, benefiting from its detachment from the intense debate raging over European monetary union, caught its breath yesterday after a nearly a week of headlong gains.

The pause came despite a group of British figures which were seen as positive for the pound. Mr Jim Power, chief economist at Bank of Ireland, said he expected sterling's slowdown to be temporary. "It will attempt to reach 2.45 marks again," he predicted. Sterling closed yesterday at DM2.4346.

"What was interesting was the pound didn't appreciate when sterling fell back," Mr Power said. He added that there was significant oversees selling of the pound as many investors took profits. The surprisingly strong, set of British labour market statistics is expected to fuel demand for the currency. They are also expected to limit the scope for the Chancellor of the Exchequer, Mr Kenneth Clarke, to introduce major tax cuts and reduce interest rates again in his annual Budget next month.

The headline jobless total declined 35,600 last month to stand at 2,073,100 or 7.4 per cent, the lowest level since February 1991, mainly due to increased employment in the services sector rather than manufacturing industry.

At the same time, unfilled vacancies increased 16,000 to 253,600, representing a year on year rise of more than 60,000 and notifications of new vacancies rose 3,300 to 222,000.

Clearly, if only a small proportion of these vacancies are filled, total unemployment will fall below 2 million by the New Year. There is evidence, too, that the tightening job market is beginning to feed through into wage inflation at last and this will be seen by the Bank of England as further ammunition in its campaign for higher interest rates.

Although average earnings were unchanged last month, the July figure was revised up by 0.25 per cent to 4 per cent. The underlying attend, therefore, edged higher over the two month period compared with the previous months rate of 3.75 per cent. Re-emerging wage inflation appears to bet stronger in manufacturing industry than in the services, possibly due to skill shortages in such key areas as engineering.

The strong set of labour market statistics was accompanied by new figures showing a reduction in the Public Sector Borrowing Requirement from £4.5 billion sterling in August to £3.5 billion", last month. Growth in tax revenues, reflecting new buoyancy in consumer spending, is continuing to be offset by overspending by government departments.

If Mr Clarke is to introduce tax cuts in next month's Budget, the growth in public sector spending will have to be brought under greater control.