THE pound has fallen below 103p sterling as the British currency gains ground on the international markets. The Irish currency slipped yesterday to 102.77p from 103.05p a day earlier, after investors rushed to buy British gilts. However, the pound reached an almost 18 month high against the deutschmark as it rose against the EU currencies in tandem with sterling.

The Irish pound rate against sterling is the lowest since March 21st and will be a small relief for exporters who should be able to take advantage of slightly lower forward rates, analysts say. But the pound is unlikely to remain below 103p for long, they warn. The pound hit a high of 103.72 on May 2nd.

Mr Dermot O'Brien, economist at NCB Stockbrokers, said it looked as if the fall was a result of Irish institutions switching out of Irish bonds into British gilts yesterday.

Sterling was rising with the dollar, Mr O'Brien added. The dollar has been hovering around 27 month highs against the yen over the last week as the Japanese authorities made it clear they still want to see a strong US currency. Sterling traditionally moves higher with the dollar. The pound followed sterling up against the D mark, hitting its highest level since December 12th, 1994. It is now above its central rate of 1.41 against the D mark.

Sterling bounced after the British auctioned 2021 stock yesterday and many investors felt there would be a short term opportunity to make money, traders said. "It was an opportunistic thing. There has been a recent pattern of rallies following UK auctions," one analyst said. "Many people also felt they would be able to get into the stock cheaply."

Unfortunately for them, many seemed to have the same idea and the "tail" on the auction was much shorter than many recently, allowing few opportunities to buy on the cheap.

The £3 billion sterling auction of 8 per cent stock, due 2021, was covered 2.04 times, or just over £6 billion of orders were received. Last time this maturity of gilt was auctioned, it was only covered 1.48 times.