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LONDON (Reuters) - Sterling slipped to a three-month low against the safe-haven yen on Tuesday but strengthened against a weaker dollar as a risk-off mood dominated amid worries about U.S.-Russian tensions over Syria.
Sterling fell as much as 0.9 percent to 136.87 yen, its weakest since mid-January, as the dollar fell below 110 yen for the first time in five months.
Markets were in risk-off mode in European morning trade, with focus on France's upcoming presidential election, and that intensified after U.S. Secretary of State Rex Tillerson carried a message from world powers to Moscow denouncing Russian support for Syria's President Bashar al-Assad.
As the dollar fell across the board, sterling rose to a five-day high of $1.2492, leaving it up half a percent.
"There’s no distinct catalyst for sterling," said MUFG's European head of market strategy Derek Halpenny. "My inclination is that this is a dollar move, with risk-off currencies (like the yen) performing well."
Against the euro, which was weakened by worries that the far-left Jean-Luc Melenchon could overtake the centrist Emmanuel Macron to reach the second round of France's presidential election against the far-right Marine Le Pen, sterling climbed 0.4 percent to an eight-day high of 85 pence.
Earlier, data showed UK inflation remained steady in March, putting no further pressure on the Bank of England to move towards raising interest rates.
Consumer prices increased by 2.3 percent annually last month, the Office for National Statistics said, in line with economists' forecasts in a Reuters poll.
Inflation has accelerated in recent months, pushed up by a plunge of around 12 percent in the trade-weighted value of the pound since last summer's decision by voters to leave the European Union, and by a rise in oil prices that has fuelled inflation in other countries too.
Inflation is now above the BoE's 2 percent target but it has indicated that it is in no hurry to raise rates, despite the fact that it expects consumer price growth to rise to as high as 2.8 percent in around a year's time before falling back.
That is partly because of sluggish wage growth - many households are facing the prospect of a renewed squeeze on their incomes after a respite in the past two years when inflation stayed close to zero - and partly because of uncertainty surrounding Brexit negotiations over the next two years.
All of that means that strong inflation data is not having the normal sterling-positive effect.
"CPI (consumer price inflation) is still above target but that’s not going to prompt an interest rate rise any time soon. The inflation we have got at the moment ... stems from a weaker currency and higher commodity prices, without an accompanying rise in UK wages so far," said Hargreaves Lansdown analyst Laith Khalaf.
Labour market data due on Wednesday will be closely watched by investors.
Editing by Tom Heneghan