(Corrects price in 4th para)
By Jemima Kelly and Ritvik Carvalho
LONDON, March 22 Sterling fell only briefly on
Wednesday after an assailant stabbed a policeman and was shot by
police just outside Britain's parliament building in London in
what police described as a "terrorist incident".
Eyewitnesses said a car had crashed into pedestrians on
nearby Westminster bridge shortly before the incident, in which
Sky News said two people were killed. The total number of
casualties was unclear.
The initial reports drove sterling to the day's lows against
the dollar and euro, but as it emerged that an assailant had
been shot, and with no reports of other separate incidents, the
pound recovered to trade broadly flat on the day.
By 1740 GMT, the pound was trading at $1.2482, having
briefly fallen to as low as $1.2424, and up from levels of
around $1.2450 before the news.
It also recovered from the day's low of 87 pence per euro
to trade flat at 86.62 pence.
British government bond futures fell back from the
session high struck immediately after the incident.
"Maybe the market is not viewing this as sufficiently
sizeable to hit the radar," said Neil Jones, head of hedge fund
FX sales at Mizuho in London.
"Some of these incidents don’t necessarily cause a massive
exodus of investors from the currency. If you look at what
happened in Germany and France in the last couple of years, you
didn’t see a dramatic sell-off in the euro. People just get on
with their business as normal."
Jones added that the market was already in the midst of
paring back big bets against sterling, and this, along with
broad dollar weakness, was helping its recovery on Wednesday.
Data showed net short sterling positions hit a record high in
the week to last Tuesday.
"ELEMENT OF RELIEF"
"There's probably a little bit of -- if we can call it this
-- relief, because of course we're still waiting to find out
about the number of casualties, which of course is extremely
sad, but ultimately it appears at this early stage to be a lone
individual," said Jeremy Stretch, head of currency strategy CIBC
"It's not at this stage appearing to be a coordinated attack
or something more substantive than that, so I think there's an
element of relief in that regard."
Stretch added that investors were refocusing on other
factors, such as UK retail sales data due on Thursday, as well
as a key healthcare reform vote in the U.S. Congress.
Sterling earlier hit a four-week high of $1.2507, having
surged 3 percent in the past week on a downturn in the dollar
amid rapidly accelerating inflation, and after Bank of England
minutes last week one policymaker voted for a rise in rates.
Britain’s blue-chip FTSE 100 and mid-caps
share indexes both ended slightly off earlier lows, down 0.7
percent and 0.8 percent respectively.
(Reporting by Jemima Kelly, Ritvik Carvalho and Danilo Masoni;
Editing by Catherine Evans)