Sterling edges up after falling overnight below $1.38

* Graphic: World FX rates in 2020

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, June 21 (Reuters) - Sterling edged higher on Monday after falling overnight to its lowest level since April as the currency remained vulnerable since the U.S. Federal Reserve surprised the market with a hawkish tone last week. The pound dropped below $1.38 against the dollar overnight, and was close to levels touched last week when the Fed signalled it would raise interest rates and end emergency bond-buying sooner than expected.

At 0840 GMT, the pound re-emerged versus a weakening dollar to rise 0.3% to $1.3839, after falling to its lowest of $1.3786 since April 16.

Versus the euro, it was flat at 85.91 pence, after closing on Friday after its worst week against the single currency since April.

Analysts said the British currency will likely remain vulnerable in the near term. “GBP has been underperforming even the soft euro as the combination of dollar strength, rising daily COVID-19 case numbers and European politics have started to weigh,” ING analysts wrote in a note to clients.

Traders are also weighing up whether the Bank of England will hike rates in 2022, ahead of the Fed. The BoE next meets on Thursday.

“We wouldn’t rule this out, though for now we’re in the camp looking for the first move in early 2023,” said James Smith, Developed Markets Economist at ING, adding he doesn’t expect the BoE to unveil news on the timing of rate hikes yet.

Currency markets are fully pricing in a 30 basis point hike in rates by the BoE by December 2022.

Investors are also watching a dispute between Britain and the European Union over post-Brexit trade in the British province of Northern Ireland.

In the meantime, asking prices for British homes between mid May and early June had their biggest rise for the time of year since 2015, property website Rightmove said.

Reporting by Joice Alves; Editing by Giles Elgood