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UPDATE 3-Pound erases loss as Europe medicine watchdog says AstraZeneca vaccine safe

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Adds charts; updates rates, news)

LONDON, March 16 (Reuters) - Sterling edged higher against the euro on Tuesday and erased some of its earlier losses against the dollar after Europe’s medicines watchdog said there was no evidence AstraZeneca’s COVID-19 vaccine was unsafe.

The pound had earlier fallen 0.65% versus the dollar to a one-week low of $1.3809 but by 1628 GMT it was down 0.1% at $1.3885.

Against the euro, it rose 0.3% to 85.59 pence, having earlier hit its lowest level of 86.40 pence since March 5.

Analysts attributed the morning tumble to news that Germany, Italy and France had suspended AstraZeneca’s COVID-19 shots amid safety fears, dampening euphoria in Britain over its own swift vaccination campaign.

The European Medicines Agency (EMA) said there was no indication that blood clot incidents in vaccinated people had been caused by the AstraZeneca shot, but experts were assessing that possibility.

The World Health Organization also said there was no proven link and people should not panic. Shares in AstraZeneca, Britain’s second biggest listed company, were up 3.6%.

“The EMA briefing in addition to the reassurances from the WHO should limit the fallout on the pound from the news regarding the suspension of the AstraZeneca vaccine,” said Jane Foley, head of FX Strategy at Rabobank.

Britain said it had no concerns but analysts have been cautious, saying that if the safety fears surrounding AstraZeneca vaccine were confirmed, it could compromise Britain’s speedy inoculation programme.

Sterling has been under pressure too from the European Union’s move on Monday to start legal action against unilateral British changes to Northern Irish trading arrangements.

However, the setback comes after sterling gained more than 5% against the dollar in the first seven weeks of the year amid Britain’s swift vaccine roll-out and declining numbers of COVID-19 infections.

Dwindling expectations that the Bank of England will push interest rates below zero, as well as the Brexit trade deal with the EU agreed in December, have also supported the pound, which rose above $1.42 on Feb. 24.

Norway, Britain and the EU said on Tuesday they had reached a deal on catch limits for jointly managed North Sea fish stocks following Brexit.

Reporting by Joice Alves Editing by Mark Heinrich

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