The U.S. dollar rose sharply against the deutsche mark Wednesday on news of weakness in the German economy.

Germany's output of goods and services declined 0.5 percent in the second and third quarters of 1991.The dollar's continued rise reflects a major change in market sentiment, a chief dealer at a money center bank said.

"The view now is that the worst economic news is behind us, that the (U.S.) economy has shifted from heading downhill to flat, and that the first glimmers of an economic upturn are at hand," the dealer said.

The dealer said the dollar's rise will be helped when major multinational U.S. corporations begin to buy dollars.

"Most multinationals need dollars for dividends, royalties and hedging balance sheets," he said.

"Unless President Bush encounters threatening political news, I believe the days of 1.55 marks (to the dollar) are over, for now. Our trading range is now 1.60 to 1.65 marks," he added.

The softening mark is helping the dollar. The German economy could be threatened by inflationary wage demands of steelworkers who are asking for a pay hike of 9.5 percent, analysts said. The union also called for a Jan. 26 strike vote.

Further, economic data released Wednesday showed the German economy stagnated in the second half of last year, while real GNP growth for all of last year was 3.2 percent, down from 4.5 percent in 1990.

The market had very little reaction to news that U.S. November business inventories rose 0.2 percent, as expected, the third monthly gain in a row.

Traders said the dollar's rise also reflected some anticipation that the Group of 7 industrialized nations may decide to push up the U.S. dollar during a Jan. 25 meeting in Washington.

The absence of central bank intervention during the dollar's recent surge suggested that other major nations accept the currency's rise, one analyst said.

The U.S. stock market's recent rise also has helped the dollar, analysts said. Foreign investors are buying dollars to cash in on rising U.S. equities, they said.