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A sensorless control system for a surface mounted permanent magnet (PM) machine is developed which uses measurement of motor current derivative during the fundamental PWM vector excitation only. Vector extension is required when the vector width falls below a minimum time duration. The extension is made to allow the high frequency switching oscillations due to parasitic capacitances in the drive to die down. This paper introduces a new method to reduce these high frequency switching oscillations, in order to achieve position estimation with lower motor current distortion. Experimental results demonstrate the improved sensorless speed and position control using the proposed method.