A new model for short-range isoscalar currents in the deuteron and in the N N system is developed; it is based on the generation of an intermediate dibaryon which is the basic ingredient for the medium-and short-range N N interaction which was proposed recently by the present authors. The new current model has only one parameter, which moreover has a clear physical meaning. Our calculations have demonstrated that this new current model can very well describe the experimental data for the three basic deuteron observables of isoscalar magnetic type, viz. the magnetic moment, the circular polarization of the photon in the np → d γ process at thermal neutron energies and the structure function B(Q 2 ) up to Q 2 ≃ 60 fm −2 .