London, Aug 20: The dollar charged higher against the mark after recovering from a dip on robust German data but softened against the yen ahead of US trade data, dealers said.

Dealers said the dollar's push above 1.85 marks was fuelled by a rise in dollar/Swiss and selling of cable after benign UK retail sales and bank lending data.Dollar/yen dropped below 118 yen amid concern about trade relations between the US and Japan and a drop in mark/yen.

The trade gap is expected to have widened only slightly in June but dealers will be watching out for a statement from US commerce secretary William Daley, scheduled for 14:00 GMT. "Given the ongoing imbalances in trade not only with Japan but also China, Mexico and Canada, the market will continue to eye statements by US officials with concern," said Michael Lewis, international economist at Deutsche Morgan Grenfell.The June trade data, due at 12:30 GMT, are expected to show a rise in the gap O $10.36 billion from $10.23 billion in May.A large rise in the bilateral gap with Japan could fuel buying of yen for dollars.

Dollar/yen rose on Monday amid relief Japan's July trade surplus was not as big as expected."If we get a surprise in the trade data, the dollar is likely to weaken temporarily," said Brian Hilliard, international economist at Societe Generale Strauss Turnbull. However, fundamentals were in favour of the dollar, given the erratic nature of the economic recovery in Japan and the healthy state of the US eoconomy.

The dollar lost ground overnight after a newspaper article said the US Trade Representative's Office (USTR) expressed concern in a letter to Japanese authorities over a delay in the deregulation of car replacement parts.The transport ministry said it was aware the USTR was sending a letter but could not comment until it had seen its contents."It should be interesting today to see what the US position but we always get an increase in worried comments when dollar/yen eyes 120 yen," said a trader at a UK bank.

Another factor supporting dollar/yen are falling Japanese market rates. The yield of the benchmark 10-year Japanese government bond fell to a fresh all-time low overnight of 2.055 percent amid concern about Japan's economic recovery.The mark got a temporary boost from a higher-than-expected Ifo business sentiment index for July. The index rose to 98.1 from a revised 96.1 in June. Market forecasts had ranged between 96.4 and 97.2Dollar/mark got back on a firmer footing after better-than-expected German M3 Figures for July and an unchanged repo rate on Tuesday dampened expectations of a near-term rise in German rates. The Bundesbank council meets for the first time since its summer recess on Thursday. A Reuters poll of economists showed no change in rates is expected but dealers will be on the outlook for any statement from the central bank.

Another sign of benign inflationary pressures in Germany emerged with the release of producer prices for July. The index was up 0.1 percent, in line with expectations. The year-on-year rate was unchanged at 1.4.

The Bundesbank kept its repo rate steady at 3.00 percent this week. Some observers still think the Bundesbank might opt for a combination of a fixed/variable repo rate tender in the near future to send a signal to the markets.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.