US DOLLAR STALLS

US DOLLAR STALLS

The U.S. dollar was little changed in dull trading Wednesday, as market participants awaited today's Bundesbank council meeting.

After Wednesday's 6-basis-point drop in the minimum accepted securities repurchase rate, most market participants expect the Bundesbank to leave key interest ratesunchanged at today's meeting, dealers said.

''The repo results failed to lend the market support," one dealer said. ''Market participants came to the conclusion that the 6-basis point drop in the minimum rate was the rate cut everyone expected for this week and that no key interest rate cuts should be expected before the end of September."

Disappointment triggered by the repo results turned into mild profit- taking, the dealer said. However, market sentiment was still bullish.

''There is consensus that rates will be cut. If not Thursday, then by the end of September. This conviction should support the dollar," one dealer said.

"The key is dollar/yen. As long as we're above 96.00, things will be pretty stable. If it goes below (that figure), the dollar will head south," said Robert Near, a dealer at the Bank of New York.

Corporate activity was subdued, however, with many treasurers waiting for a clear break above 1.5000 deutsche marks before jumping on the hedging bandwagon.

The Mexican peso continued its recent slide on nervousness over a bank loan restructuring program, scheduled to be revealed Wednesday afternoon.

The peso was at an interbank spot rate of 6.32-6.34 to the dollar at noon local time, according to a major Mexican bank. The peso closed Tuesday at 6.265-6.275.

Traders and analysts said the peso was weakening on expectations that banks would have to reduce their margins under an accord that will give consumers and businesses below-market interest rates on a portion of their outstanding loan balances.

The market will need to "see how much the margins shrink," said one analyst. He and another analyst mentioned nervousness over political affairs in Argentina as factors depressing the peso. News this week suggested that Argentine Economy Minister Domingo Cavallo might leave office, a report he denied Tuesday.

''I think (the peso) is influenced by the nervousness over what's happening in Argentina," said an analyst.

The peso could slide further to 6.40 before things calm down, the analyst said.