EUROPEAN MARKETS REACT QUIETLY TO G-7 COMMUNIQUE European currency markets reacted quietly to the G-7 communique, with comments from bankers and dealers ranging from disappointment that it was not more concrete to surprise that the markets should have expected so much. The dollar opened lower against virtually all currencies and traded in a narrow range after the communique, which reaffirmed support for the Paris accord on currency stabilisation but contained no moves to strengthen it. Dealers in Frankfurt and Zurich saw the dollar remaining broadly entrenched in its current trading range. "The dollar is likely to stay within a range of 1.80 to 1.84 marks," said Gisela Steinhaeuser, senior dealer at Chase Bank AG. She said there was some resistance to further climbs. However, she said the dollar could break out of the range with major surprises such as a worse-than-expected U.S. Merchandise trade deficit, due next Tuesday. Theodor Stadelmann, dealer with Bank Julius Baer and Co Ltd in Zurich, said he expects the dollar to hold steady against the mark and Swiss franc but to weaken further against the yen, possibly to 140 yen. A Milan banker shared Stadelmann's view, saying he expects a dollar-yen range of 140-150 in the short term. London traders said the G-7 communique failed to curb underlying bearishness toward the dollar but this negative sentiment was not yet strong enough to tempt interbank operators to test the downside. Concern that finance ministers and officials still in Washington could issue more concrete statements in favour of currency stabilisation kept players sidelined, along with worries about provoking fresh central bank intervention in the near term, the traders said. Most Paris dealers expressed disappointment at the communique, saying nothing has changed to reverse the dollar's downward trend. Traders in several centres said the market would look for fresh opportunities to test the willingness of central banks to defend current ranges, which the communique said were "broadly consistent with economic fundamentals and the basic policy intentions outlined at the Louvre meeting." Dave Jouhin, senior dealer at Midland Bank in London, said "They're going to put somebody's resolve to the test soon." The U.S. February trade data may provide the trigger, dealers said. However, some dealers said London-based operators would be unlikely to open major positions next week ahead of the long Easter weekend. They saw near-term technical support at 1.825 marks and 145 yen and resistance about 1.83 marks and 146 yen. Chase Bank's Steinhaeuser and other Frankfurt dealers said the G-7 communique guaranteed a relatively calm and stable market for the foreseeable future compared with the extreme volatility seen in the first few months of this year. One dealer at a German bank said the wording of the communique made clear the leading nations did not want a further dollar drop, and this was supporting the dollar. The German dealer saw the dollar gradually appreciating to 1.87 marks, broadly seen as its upper limit within the Louvre accord's supposed currency target range. A Swiss bank economist said he believed the markets were ready for a period of "mainly sideways movement." But Milan dealers were sceptical about the communique contributing to greater stability. "Nothing has changed substantially to give the dollar a big boost," said one dealer, while another Italian banker said he expects the dollar to trade between 1.77 and 1.87 German marks in the next three months. A Swiss monetary source, who asked not to be named, said the communique had been in line with realistic expectations and should not have produced disappointment. "The problem is that the changes needed in fiscal and trade policies to redress current imbalances are of a different timescale than currency markets operate on," the source told Reuters, "This is a political process which takes time." Alois Schwietert, chief economist at Swiss Bank Corp in Basle, also questioned the tone of disappointment evident on currency markets today. "Did people really expect a patent remedy?" he asked. Bank economists in Paris noted yesterday's meeting was only the first in a series and said the market would watch carefully in the next few weeks for any changes in positions. A senior economist with Banque Indosuez said the focus was now on trade and growth rather than interest rates. Any move by Japan and West Germany to boost their economic growth could lead to a quick change in the U.S. Position. Dealers in all centres agreed that markets would be wary in pushing the dollar too far too quickly in the coming months while central banks appear resolved to use their muscle to support the Paris accord.