THE pound has weakened slightly against sterling, closing at around 103.68p late yesterday. "It wasn't hectic activity," said Mr John Beggs, chief economist at AIB Group Treasury. He believes market forces will push the pound back as far as 103.50p later this week.

However, looking further ahead, Mr Beggs said the pound will move above 104p as sterling comes under further pressure as political worries mount. Although the pound was quoted around 104p for a brief spell on Friday, traders said the it did not actually trade above that level.

Sterling gained against the dollar early yesterday as the market decided the British interest rate cut last Thursday may not have been politically motivated, as many had initially feared.

Yesterday sterling was trading up to $1.5140 from $1.5090 on Friday. It also gained against the deutschmark, trading as high as DM2.2383 from DM2.2329 on Friday.

"Sterling was boosted after fourth quarter growth figures released in Britain were weaker than expected, with quarter on quarter growth coming in at 0.4 per cent", said Mr Jim Power, chief economist at Bank of Ireland.

The year on year gain of 1.8 per cent was the lowest recorded since the 1.6 per cent rise in the first quarter of 1993. This has raised doubts over the government's 3 per cent growth forecast for 1996. "This means the British government had a sound economic case for cutting rates last week." Mr Power added that he expects a further 0.5 per cent cut over the next three to four months.

He anticipates that the pound will strengthen further against sterling as political nervousness continues in Britain. "We will see 105p in the next few months," he said, "although we won't get there in a straight line."

Irish exporters say they are being hit by the strong pound. Mr Ciaran Fitzgerald, director of the Food Drink and Tobacco Federation, said sterling's weakness means that returns for food exporters to Britain have fallen by over 6 per cent since January last year. "Government imposed costs, such as PSRI, must be reduced or the food industry will lose market share and reduce employment," he warned.

However, exporters have gained from dollar movements. Mr Beggs said the pound trading at $1.5650 has "proved very attractive for many exporters. They took the opportunity to convert into Irish, creating a demand and reinforcing the pound against sterling".