AFTER G-6, ROUND ONE GOES TO CENTRAL BANKS Central banks have easily beaten back the foreign exchange market's first test of the industrialized nations' recent pact to stabilize currencies, analysts said. In active trading this week, the market pushed the dollar, sterling, the Canadian dollar and Australian dollar higher. But operators got their fingers burned as one by one the central banks signalled their displeasure. "So far G-6 has been a roaring success,"said James O'Neill, financial markets economist at Marine Midland Bank NA. "The central banks are sending strong signals that they won't tolerate any kind of momentum building behind currencies," added a senior corporate trader at one U.K. bank. On February 22, the finance ministers and central bank governors of the U.S., Japan, West Germany, France and the U.K. -- the Group of Five -- plus Canada, signed an accord under which they agreed to cooperate closely to foster stability of exchange rates around prevailing levels. The agreement was viewed by many in the market as an attempt to put a floor under the dollar after its sizeable two-year decline against major world currencies. And initially, traders indicated their respect for the accord by refraining from pushing the dollar lower. But by Wednesday, the dollar climbed to more than 1.87 marks, about five pfennigs above its levels the Friday before the G-6 accord. The move was aided by indications that the U.S. economy picked up steam in February at the same time as the West German economy was regressing. But dealers said the Federal Reserve Bank of New York gave traders a sharp reminder that the G-6 pact had encompassed the idea of limiting inordinate dollar gains as well as declines. Dealers differed as to whether the U.S. central bank actually intervened to sell dollars above 1.87 marks, or simply telephoned dealers to ask for quotes and enquire about trading conditions. But the dollar quickly backed off. It hovered today around 1.85 marks. "The market was surprised that the Fed showed its face so soon," said Marine Midland NA's O'Neill. Also on Wednesday, London dealers said the Bank of England intervened in the open market to sell sterling as the U.K. currency rose to 1.60 dlrs compared with 1.5355 dlrs before the G-6 pact. Sterling, along with the other high-yield currencies like the Australian dollar and Canadian dollar, was in favor after traders surmised that the the chance of intervention pursuant to the Paris currency accord left limited room for profit plays on dollar/mark and dollar/yen. The pound also was boosted by suggestions of an improving U.K. economy, anticipation of a popular British budget on March 17 and public opinion polls showing good chances for the incumbent Conservative party in any general election. "There was a real run on sterling," said Anne Mills of Shearson Lehman Brothers Inc. Sterling traded today around 1.5750 dlrs, down from 1.5870 dlrs last night. It slid to 2.917 marks from 2.950 yesterday and from a peak of about 2.98 recently. "There's been some heavy profit-taking on sterling/mark ahead of next Tuesday's U.K. budget," said James McGroarty of Discount Corp. As speculators detected the presence of the U.S. and British central banks, they acclerated their shift into Canadian and Australian dollars. But here too they were stymied. The Bank of Canada acted to slow its currency's rise. The Canadian dollar traded at 1.3218/23 per U.S. dollar today, down from 1.3185/90 yesterday. And the Australian Reserve Bank, using the Fed as agent, sold Australian dollars in the U.S. yesterday, dealers said. The Australian dollar fell to a low of 67.45/55 U.S. cents today from a high of 69.02 Thursday. Analysts said the central banks' moves to stifle sudden upward movement, leave the market uncertain about its next step. Today, the focus shifted to the yen which has held to a very tight range against the dollar for several months. The dollar fell to 152.35/40 yen from 153.35/40 last night. Analysts said the yen also gained as traders unwound long sterling/short mark positions established lately. "Because of the change in perceptions about the health of the German economy, the funds from those unwinding operations are ending up in yen," a dealer at one U.K. bank said. Recent West German data have shown falling industry orders, lower industrial output and slowing employment gains. Moreover, the yen is benefitting as Japanese entities who have invested heavily overseas, for example in Australian financial instruments, repatriate their profits ahead of the end of the Japanese fiscal year on March 31. Noting that the dollar/yen rate is in a sense the most controversial one because of the large U.S. trade deficit with Japan, analysts said the stage could be set for another test of the dollar's downward scope against the Japanese currency. In its latest review of the foreign exchange market through the end of January, the Federal Reserve revealed that it intervened to protect the dollar against the yen on January 28. On that day, the dollar fell as low as 150.40 yen. "Sure, the Fed bought dollars near the 150 yen level in January. But the market has to bear in mind that time marches on and the situation changes," said McGroarty of Discount.