December 20, 2016 / 4:30 PM / 7 months ago

Sterling hits one-month lows as Scotland unveils Brexit options

3 Min Read

* Graphic: sterling and gilt yields bit.ly/2dgAXn1

* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh

By Abhinav Ramnarayan

LONDON, Dec 20 (Reuters) - Sterling hit one-month lows against a broadly stronger dollar on Tuesday as Scotland's premier said she was willing to push for independence from the rest of the UK in order to maintain access to Europe's single market post-Brexit.

Scottish First Minister Nicola Sturgeon said her preference in the Brexit aftermath was for the whole of the UK to stay in the single market, which trades goods and services tariff-free across 28 countries.

A second option proposes a single market membership carve-out for Scotland from a UK outside the EU. The third option is independence from the rest of the UK.

"Sterling has been under pressure because of these issues with the potential Scottish referendum, after (Sturgeon) set out red lines on Brexit scenarios and talked about continued access to the single market," said Societe Generale currency strategist Alvin Tan.

The pound hit a one-month low of $1.2313 before edging up to around $1.2350 by 1555 GMT, still down 0.3 percent on the day. Sterling also fell on Monday, losing 0.9 percent on the back of concerns over how UK businesses will manage the exit from the EU.

British Prime Minister Theresa May told a committee of lawmakers on Tuesday that she did not think there was a need for the Scottish government to hold another referendum. If Scotland were to become independent, she said, it would no longer be a member of the EU.

May told the committee that the needs of businesses adapting to a new relationship with the European Union would be addressed once a deal for Brexit has been struck.

But BNP Paribas strategist Sam Lynton-Brown said sterling's fall on Tuesday had little to do with any of May's comments.

"I don't feel (the move) is on anything fundamental. It is much more a function of the stregnthening dollar and some adjustments by traders to their positions towards the year-end," he said.

The dollar climbed to a 14-year high on Tuesday after Federal Reserve Chair Janet Yellen's comments about the labour market reinforced the notion of a faster pace of U.S. interest rate hikes next year than had been expected.

Sterling also fell 0.4 percent against the single currency to 0.8419 pence by 1545 GMT. (Editing by Alison Williams)

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