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This work describes a newly developed magnetic resonance imaging (MRI) data-acquisition strategy which replaces the standard Fourier phase-encoding with the spatially localized coefficients of wavelet-encoding and offers a new technique for image guidance when combined with a dynamic tracking algorithm. By using this new technique, only a specific fraction of the entire raw data set needs to be updated and reconstructed to visualize the movement of an interventional device during an MR guided procedure. The combination of wavelet-encoding and a dynamic tracking algorithm was implemented in two-dimensional and three-dimensional gradient-echo sequences on a 0.2-T open C-arm-shaped MR system (Siemens, Erlangen Germany) and tested in phantom and in vitro experiments. When applying the wavelet-encoding direction parallel to the movement of a straight interventional device, only those spatially localized wavelet-coefficients mainly affected by the interventional device are updated. This led to potential increases of the image frame rate by a factor of up to seven.