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By Jemima Kelly and Patrick Graham
LONDON, March 15 Britain's battered pound
recovered half a percent against the dollar on Wednesday,
propped up by corporate demand as investors looked for bargains
after it hit two-month lows the previous day.
The pound has lost almost a fifth of its value versus the
greenback since last June's vote to leave the European
Union, with currency traders concerned that the foreign flows of
capital that Britain relies on just to fund its gaping current
account deficit will dry up.
It skidded to as little as $1.2110 on Tuesday, its lowest
since Jan. 17, hit by fears of prolonged political jousting over
the terms of Brexit.
But it bounced back to as high as $1.2258 in early trading
in Europe on Wednesday, before easing off to trade at $1.2217 by
1620 GMT, still up half a percent on the day.
Against the euro, sterling climbed 0.3 percent to hit 87.02
"There is uncertainty out there about how much of the Brexit
effect is priced in – clearly we’ve had huge movements in
sterling since June and when we do see these sharp falls there
are people around looking for bargains," said Rabobank currency
strategist Jane Foley.
Dealers said orders had been pushed through at the start of
European trade, before labour market data at 0930 GMT.
But sterling more than halved those gains in the hour after
the numbers, which showed a dip in wages growth. Traders said it
looked as if there had been a build up of corporate demand for
sterling between $1.2150 and $1.22 that blocked further falls.
Most analysts say that the roughly 20 percent fall against
the dollar and 13 percent loss against the euro
since the Brexit vote has left sterling looking undervalued from
a longer-term perspective.
But a number of leading banks have also forecast it to fall
further as negotiations on the terms of Britain's exit from the
EU begin in the weeks ahead.
The pound's fall to its lowest since mid-January on Tuesday
came after Prime Minister Theresa May won the last of the votes
in parliament required to start the Brexit process.
"With the ongoing Brexit woes effectively strengthening the
relationship between uncertainty and sterling, further downside
losses should be expected," wrote FXTM Research Analyst Lukman
Sterling inched up about 10 ticks in afternoon trading in
Europe, after a Survation poll found a majority of voters still
oppose Scottish independence and believe that a second
referendum on the issue should not be held before Britain leaves
the European Union.
"Perhaps for international investors who don't have a real
handle on these issues, you could imagine there was relief that
those who want to leave are in the minority still, even if it's
close," said Foley.
(Editing by Ken Ferris)