The pound has continued to trade at around 86p sterling, its lowest level against the British currency for more than eight years. While trading was very thin yesterday, the pound also weakened marginally against the deutschmark and the dollar, with economists predicting further erosion in the New Year.

For most of yesterday the pound traded at just above 86p with sterling weak against the major currencies. Dealers reported some selling of the Irish currency, and are braced for a possible sell-off by investors who believe the Government won't revalue the pound in the run-up to European Monetary Union. The pound's central parity rate within the European Exchange Rate Mechanism is DM2.41 and dealers are suggesting it may be sold down to around those levels in the New Year unless there is a revaluation.

That sentiment helped to push the Irish currency down by one pfennig against the deutschmark yesterday to close at DM2.5630.

The pound also moved to one of its lowest levels for some years against the dollar, dropping to $1.43, as the US currency continued to benefit from the economic problems in the Far East.

In Britain, predictions by the Central Bank governor of an economic slowdown sent sterling lower against the deutschmark.

Meanwhile, Bundesbank president Mr Hans Tietmeyer was quoted yesterday as saying it was wrong to assume that interest rates in the European Union would converge at the current low level in core countries before monetary union.

Mr Tietmeyer told Boersen-Zeitung newspaper that the present level of short-term interest rates in core EU countries should not be regarded as fixed.

In the run-up to monetary union interest rates in Europe were likely to converge towards levels prevailing in the core countries, Mr Tietmeyer said. But that did not mean the rates in core countries would not change.