But Fed officials cautioned they would not let down their guard until businesses and financial markets resumed full operations in the first business week of 2000.

"Obviously we're confident but there is still a question mark," said Doug Tillet, spokesman for the Federal Reserve Bank of New York.

He said the New York Fed had reduced its staff monitoringthe Y2K transition.Another New York Fed spokesman, Steve Malin, said heanticipated armoured cars would be kept busy as banks returned stocks of excess vault cash which had been distributed in case businesses and consumers withdrew funds ahead of the Y2K transition.

"There are individual households and businesses that areholding more money than they need, and the banks have a sizable amount of vault cash. Some of that cash will come back," Malin said.

The Y2K bug stems from mainly older computer systems whichwere programmed to read only the last two digits of a year. Left uncorrected, it was feared systems would misread 2000 as 1900, causing systems to malfunction or even crash.

In Washington, the Federal Reserve Board said its "healthchecks" of U.S. Financial institutions were proceeding without problems and that it would continue tooperateacommand centre on a 24-hour basis through Tuesday or Wednesday. "We look forward to a continuous smooth transition but willremain vigilant," said Rose Pianalto, a Fed spokeswoman.She said the Fed had had no problems processing checks andelectronic payments or with file transfers with several hundred customers, and that a mock auction of U.S. Treasuries had been successful. "Without the enormous effort that has been put in by theFederal Reserve and the Financial institutions, you would not be able to write a story about how smooth the rollover is going," Pianalto said.