Yes you should be able to use Dynamic SQL with Update statements. For example, the video that Chris linked to in his response above (at about 1:07) shows an example of an UPDATE statement being coded both as Static and Dynamic SQL. This example was using the Micro Focus OpenESQL Interface. If you are using another (database) vendor's product, that product probably also provides some support for Dynamic SQL - you'll need to check with the vendor's documentation to be sure.
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