The U.S. dollar sailed above 100 yen Tuesday.

"By the middle of the first quarter of 1996, the dollar should be very stable above 110 yen," one dealer said."We're buying everything against the yen. The dollar has been a bene- factor of the yen's overall weakness and should continue higher as Japanese bank officials try to talk the yen lower," said a European bank dealer.

While the dollar's outlook against the yen remains favorable, particularly if central banks do more buying, the U.S. currency is expected to have a harder time breaking above 1.5 deutsche marks.

"It's just not a beneficial investment right now," one trader said, referring to the dollar against the mark.

"We think the dollar is going higher, but the question is when, and right now there are better places to invest our time and money."

Meanwhile, Swiss National Bank President Markus Lusser said a fixed deutsche-mark exchange rate would not always be the best guideline for Swiss monetary policy, contending that money-supply growth was a better indicator. Traders interpreted Mr. Lusser's comments as meaning no rate reduction for the Swiss.

The August producer-price report was a nonevent for the dollar. U.S. producer prices fell 0.1 percent, with the core rate up 0.1 percent; the consensus forecast called for an increase of 0.1 percent overall.

While the report is regarded as bullish for the dollar in the long term, many market-watchers said the report on the consumer-price index - to be released today - will round out the inflation outlook.

"The banking crisis in Japan is beyond our wildest dreams. The Bank of Japan will have to lower rates further and the dollar will continue to rise," said Domenick Presa, chief dealer with Dresdner Bank.

There was some some talk of possible Federal Reserve intervention. There is a "bit of market paranoia regarding the Fed," said Kevin Lowrie, chief dealer with Mellon Bank in New York, adding: "(U.S. Treasury Secretary Robert) Rubin himself was a trader and leans more toward surprising the market."

New York Federal Reserve President William McDonough said Tuesday in Brussels that the yen exchange rate reflects economic fundamentals more closely now than it did several months ago.

The dollar rose to an eight-month high against the yen Tuesday.