LONDON -- The turmoil in the European currency markets abated somewhat yesterday as a joint effort between France and Germany stabilized the value of the franc.
Analysts said that the volume of buying and selling in the foreign exchange markets slowed substantially, and that the odds were improving that Europe's tattered monetary system would hold together.
But they said the franc and several other weak currencies remained vulnerable to the waves of speculative pressure that forced the devaluation last week of the British, Italian and Spanish currencies and led Britain and Italy to leave the European system of stable exchange rates.
One day after France and Germany declared their support for the French currency, their central banks again bought francs on the open market, and their intervention in the market maintained the franc's value, as it had Wednesday.
In late trading in Europe, it took 3.3981 francs to buy one German mark, compared with 3.4090 francs at the close Wednesday. Under the exchange rate agreement, France and Germany are obliged to keep the franc's value stronger than 3.4305 to the mark.
"It's been a good day as far as the French authorities are concerned," said Jeremy Hawkins, senior economic adviser at the Bank of America in London. "We're in at least a lull, but whether the storm is over remains to be seen."
Economists view a successful defense of the franc as vital to restoring the credibility of the European Exchange Rate Mechanism. A collapse of the mechanism would -- all hope of creating a coordinated monetary policy for the European Community -- and perhaps a single currency -- by the end of the decade.
Prime Minister John Major of Britain all but ruled out yesterday a single currency, at least in the near term. "I must say to those who have exaggerated ambitions for a single currency, it must now be an ambition postponed," he said during a parliamentary debate.
Other European officials, however, pressed to get the process of European unification back on track by ending the currency crisis.
"Now we have to act to explain to the speculators that they are wrong, that they will lose money," Jacques Delors, the president of the European Community's executive commission, said in Brussels, Belgium.
It was unclear whether France and Germany could keep their advantage over the market. Analysts said the French central bank may have depleted most of its foreign currency reserves, leaving it vulnerable if investors renew their selling of the franc and buying of the mark.
They said speculators had been held back by the implicit threat from France and Germany that they would go to whatever lengths necessary to defend the franc. But they said France might be reluctant to employ its remaining weapon -- higher interest rates -- for fear of plunging the economy into recession.
Germany and its central bank, the Bundesbank, can help by intervening in the markets by selling marks and buying francs. But economists said Germany was unlikely to cut its interest rates, the one step that other European nations were most hoping for and the one that would unquestionably take the pressure off the franc.
Economic statistics out this week suggested that German inflation may be increasing.
"That's going to underline as far as the Bundesbank is concerned that interest rates must remain very firm," Mr. Hawkins said.
Despite the calming of the markets yesterday, the currencies of Spain, Ireland and Portugal remained under pressure and were in danger of falling below the values they are allowed in the exchange rate agreement.
To head off further selling of its currency, Spain imposed currency controls on investors Tuesday -- forcing banks lending pesetas to foreigners to deposit an equal amount with the central bank, thus limiting the funds available for borrowing. Ireland took a similar step yesterday.
In imposing currency controls, Spain and Ireland appeared to be violating European Community regulations that require the free movement of capital, a key element in the development of a single market.
But officials of the European Community in Brussels declined to say what action, if any, they might take.