The pound gained slightly yesterday as traders closed off their books ahead of the weekend. In a pattern which has been developing over the past month, traders appear reluctant to sit on their position over the weekend in case a revaluaton is announced. The weekend is the most likely time for any such announcement.

The pound closed at 88.3p against sterling from 88p a day earlier and at 2.6995 deutschmarks from DM2.6965.

Mr Oilver Mangan, economist at AIB Treasury, said that while further speculative runs on the currency failed to materialise, the large sell-off on Thursday had highlighted the risks.

"If the market begins to doubt that the pound will be revalued it will be a sitting duck."

However, Mr Jim O'Leary, chief economist at Davy Stockbrokers, said it is not only revaluation but also the market perception that the pound will enter the euro at a higher rate than its current central parity against the deutschmark of 2.41.

He added that other factors likely to support the pound are a belief that monetary union is not yet a certainty and if it is postponed the pound could benefit. The large gap between Irish and German interest rates will also lend support, he said.

At the same time sterling also weakened slightly against the deutschmark. Mr Mangan pointed out that the Germans now appear anxious that they should go into the single currency with a strong currency. "They appear anxious that the mark should not fall any further," Mr Mangan said.

The central bank's influential chief economist, Mr Otmar Issing, focused the debate on Thursday evening by saying in a television interview that he was "worried" about the "speed and breadth" of the deutschmark's depreciation. Previously, senior Bundesbank officials had contented themselves with suggesting that the deutschmark/dollar rate did not suit them.

Mr Issing also stressed that the bank would remain "vigilant" in the coming weeks.

Irish retail sales data had little impact on the market. The value of Irish retail sales rose a provisionally adjusted 2 per cent in May, giving a year-on-year increase of 6.5 per cent. However, the pick up had little impact as May inflation data has already been released and showed no evidence of a pick-up from this direction.