Currency analysts expect the dollar to continue to rally against the yen and deutsche mark this week, advancing an upward tick started last week after the Japanese government decided to expand steps to promote investment abroad.

That move, mixed with evidence that the German Bundesbank will let the so- called repo rate fall further, has some analysts predicting the dollar will reach 97 yen and 1.45 deutsche marks by week's end.Kevin Harris, an international economist for MCM Inc., a financial market advisory firm based in New York, said a Japanese finance ministry official's announcement Friday that Japan would strengthen its steps to promote overseas investment would undoubtedly push the dollar higher as the Japanese buy more


"As the Japanese go overseas to invest, I think the dollar is going to spiral upwards," Mr. Harris said. In early afternoon trading on Friday, the

dollar was trading at a five-and-a-half month high against the yen, or 93.67, and a two-and-a-half month high against the mark.

Mr. Harris added that the Japanese announcement was "craftily timed" to be released near mid-day in New York, but before the markets closed in Europe in order to keep European dealers from selling too many dollars before the weekend.

Stephen Jury, chief dealer at UBS Foreign Exchange, New York, agreed that the dollar would reach new highs next week.

"If it can get past the technical resistence level of 94 . . . it could reach 97 yen," Mr. Jury said.

Yet other analysts said they expected the rally to be short-lived and last only through the week. The basic market fundamentals have not changed, they said.

"Until the United States stops consuming so much and starts to save and the Japanese stop saving so much and start to consume, we're still going to have a trade deficit and the Japanese will have a surplus," said Francoise Soares-Kemp, currency analyst at Credit-Suisse, New York. "For the life of me, I can't understand what this rally is about."

Nonetheless, she expects the rally to continue through the week with the

dollar reaching 95 or 96 against the yen and 1.45 against the deutsche mark.

Analysts said the general weakness of the deutsche mark against other European currencies, combined with the Bundesbank's signal last week that it would let the so-called repo rate fall further, are also behind the dollar's strengthening against the deutsche mark.

Bundesbank Deputy President Johann Wilhelm Gaddum said last week that there was still room for banks to pitch bids lower in securities repurchase operations, if they judged this to be appropriate. Mr. Gaddum said some room for maneuvering remained between the 4.45 percent repo rate and the 4 percent discount rate.

A lowering of the rate for purchase and resale agreements, known as repos, would signal the German central bank's intention to eventually lower the discount rate.

In the upcoming week, trade analysts will be watching for the U.S. Department of Commerce's monthly trade figures, scheduled for release on Thursday. Mr. Harris said the dollar would strengthen only if the monthly deficit decreased. But even an increase in the deficit would not cause a downward tick in the dollar, he said.

"People are going to say those are old numbers . . . it was an earlier period," he said. "There's always monthly fluctuations."

Other figures traders will be watching for are today's release of the inventory levels of U.S. businesses, the industrial production and capacity utilization figures on Tuesday and housing starts on Wednesday.