The U.S. dollar rose above the key psychological level of 1.70 deutsche marks early Wednesday afternoon, amid concern about inflation in West Germany.

The Federal Reserve reportedly intervened to sell dollars against yen at 149.10 yen. Dealers said they believed the Fed acted on behalf of the Bank of Japan, which sold dollars against yen in the Tokyo market Wednesday morning.Dealers said the deutsche mark was widely sold against dollars, yen, the pound, guilders, the lira and Swiss francs on Wednesday morning's report that East Germany will insist on a 1-to-1 exchange rate of Ost marks to deutsche marks.

On the final day of the month, traders were unwilling to risk major moves lest they jeopardize February profits or worsen losses.

The yen, benefiting from a return to stability in the Tokyo stock market, was trading quietly and narrowly in the range of 148.65 to 149.15 yen to the dollar. It remained within that range after the reported Fed intervention.

''The market's feeling very nervous about the mark," said John McCarthy of Amsterdam-Rotterdam Bank. "The 1-to-1 exchange ratio (of East German currency to deutsche marks) would be very inflationary, and we're presuming it's political talk. But it might not be. The truth is, no one is sure now what the ramifications of German monetary union would be, and we're anxious to see the March 18 (East German) elections behind us."

In London Wednesday, the sterling rally of recent weeks remained intact despite a jolt from a much worse-than-expected U.K. January current account figure.

The headline figure of 1.9 billion ($3.36 billion) in deficit was wide of the 1.3 billion market forecast and compared with a revised 817 million deficit in December.

''People quickly realized the figure wasn't as bad as first thought," one dealer said.

The three-month trade picture is still one of an export-led improvement in the deficit, and erratics explained a large part of the January figure, economists said.

The dollar also managed to survive a brief tick down after U.S. gross national product for the fourth quarter was revised upward to 0.9 percent from the original estimate of 0.5 percent.

Activity in the yen was subdued after the market lost the will to take on the Bank of Japan, which has spent billions of dollars supporting the yen.

The market still thinks the yen should weaken in the absence of a Japanese discount rate hike.