NEW YORK (AP) _ The dollar rallied to a five-week high against the mark and nearly two-year high against the Swiss franc Monday, reflecting widespread selling of European currencies for dollars in the aftermath of Italy's readmission to Europe's exchange-rate system.

The dollar also was helped by widespread weakness in the yen after a top Bank of Japan official acknowledged deep-seated concern about more possible Japanese bank failures due to an overhang of bad debt. Japan's government closed the regional Hanwa bank last week because it was insolvent, the first time that's happened in postwar Japan.

Traders said Treasury Secretary Robert Rubin also helped the dollar by reaffirming his belief in a strong currency late in the trading day.

``We saw across-the-board buying of dollars. Everybody wanted them,'' said Ralph Delzenero, vice president of foreign exchange marketing at First National Bank of Chicago.

As of 4 p.m. in New York, the dollar cost 1.5230 marks, up from 1.5065 Friday and the highest level since Oct. 22. Against the Swiss franc the dollar's advance was even more pronounced, rising from 1.2708 to 1.2877, the highest level since mid-January 1995.

The dollar cost 112.63 yen, up from 111.46 yen Friday and the highest level since Nov. 6.

Uncertainty over the British budget to be unveiled Tuesday helped pull back the pound from its recent string of four-year highs against the dollar. The pound cost $1.6686, down from $1.6798.

Traders said the main force driving the market Monday was weakness in the mark following a weekend meeting among European Union members that readmitted the lire to the European Exchange Rate mechanism, a system for keeping member country currencies relatively stable against one another.

The lire's central rate of 990 to the mark was considerably more expensive than its 999.75-lire exchange rate on Friday, and immediately triggered widespread selling of marks when currency markets reopened. It was an unexpectedly cheap rate for the mark and prompted traders to sell all European currencies against the dollar.

``Mark weakness for lire is what partially got this started,'' said Debra Larsen, assistant vice president for foreign exchange at the New York branch of Commerzbank. ``The dollar started to turn against the mark.''

Italy was forced to abandon the ERM two years ago after failing to defend the lire against heavy speculative selling of the currency.

Its readmission is a precondition for Italian participation in plans for a single European currency in 1999, but there has been bitter debate over what the lire's readmission rate should be. Under the ERM, the lire must stay in a range of 15 percent above or below that rate.

Traders said the basis for a dollar rally was set early in Asian dealings after Tadayo Honma, executive director of the Bank of Japan, said more Japanese financial institutions may fail in the future and ``we can't let our guard down given the many issues that remain unresolved.''

The Japanese banking system's fragility is seen as a key reason why Japan's record-low interest rates aren't likely to rise anytime soon. The low rates are helping banks improve profits but are depressing the yen by making assets denominated in yen less attractive.

Some traders said the dollar's rally also reflected demand for the currency in a holiday-shortened week. There will be no U.S. trading on Thanksgiving Day and very little on Friday.

``People are looking at the long weekend, and figured if they were short dollars, they just get back and square their positions,'' said Roger Chapin, foreign exchange manager at Bank One in Columbus, Ohio.

Other late dollar rates in New York, compared with late Friday: 5.1550 French francs, up from 5.1095; 1.3426 Canadian dollars, up from 1.3399; 1,510.75 Italian lire, up from 1,496.00.