LONDON (AFX) - The dollar was well bid in early London trade, supported by ongoing repatriation flows into the US, dealers said. They added that with little by way of economic news today, equity markets' performance will remain in focus. "The bloodbath in US banking shares triggered further repatriation flows into the US which helped support the dollar," said Michael Klawitter, analyst at WestLB. However, Klawitter believes the flows will be short-lived, and that the foreign appetite for US assets remains most important for the medium to longer-term trend of the greenback. "We strongly doubt whether foreign demand for US corporate assets, which reached 338 bln dollar last year, will remain that strong," he said. The analyst expects the currently rising US current account deficit "to run into severe financing problems in the not too distant future". "Not only is the US running a massive deficit, but consumer debt has reached worrying levels which makes the US economy more vulnerable (than Europe) to a drop in asset prices," he said. The euro continued to hover around of the 0.90 usd level, having failed to break through the 1.02 usd barrier last week. Today's release of the first German state CPI came in on the strong side of expectations. For Sharda Dean, economist at Merrill Lynch, rises in accommodation and vacations services, which rose 1.8 pct on the month, will be replicated in other states. "If they all rise by 0.4 pct on the month we'd be looking at a 1.2 pct year-on-year national German inflation rate, up from 0.8 pct," said Dean, adding that this may lead to more speculation about the need for an early rate hike from the European Central Bank. However the economist expects inflation rates to begin to fall again in September, particularly as the strength of the euro starts to show through in weak goods prices. Consumer prices in the state of Hesse were up 0.4 pct in July from June, and were up 1.2 pct from July last year. The Federal Statistics Office uses consumer prices data from Baden- Wuerttemberg, Hesse, North Rhine-Westphalia, Saxony, Brandenburg and Bavaria to determine its provisional CPI for Germany. Kamal Sharma, economist at Commerzbank predicted that tomorrow's German Ifo index will show that industrial confidence is recovering, but not at a rate that would justify higher rates immediately. "In any case, with private consumption still weak, firms pricing power has been seriously eroded. Under these circumstances, we do not believe that the ECB needs to hike rates this year," he added. Meanwhile, sterling mixed ahead of the Confederation of British Industry quarterly industrial survey due at 11.00 am.