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FOREX-Sterling sags to 31-year low; dollar near 2-week high
October 4, 2016 / 3:16 PM / a year ago

FOREX-Sterling sags to 31-year low; dollar near 2-week high

* Sterling loses nearly 2 pct vs dollar in two days
    * Dollar hits 13-day high vs yen after upbeat U.S. ISM data
    * Fed's Lacker sees case for higher U.S. interest rates
    * RBA holds rates at 1.5 pct; Aussie shows little reaction

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Oct 4 (Reuters) - The sterling stumbled to its
lowest level against the dollar in 31 years on fears over the
fallout of Britain's looming exit from the European Union, while
the greenback strengthened on upbeat economic data and bets on a
year-end U.S. interest rate increase.
    The pound has fallen 1.8 percent after British Prime
Minister Theresa May's announcement on Sunday that the formal
process to take the nation out of the EU would start by the end
of March. 
    "Everything people are hearing from the UK is not positive
for its currency," said Paresh Upadhyaya, director of currency
strategy at Pioneer Investments in Boston.
    Many in the market worry that the British government's
stance points to a "hard Brexit," in which Britain splits
entirely from the single market in favor of retaining control
over immigration, which could drive an exodus of banks from
London.
    The sterling was down 0.7 percent at $1.2752 after
falling earlier on Tuesday to $1.2735, its weakest since June
1985. It has declined 15 percent since Britain's June 23
referendum on EU membership.
    The pound was down 0.2 percent at 87.42 pence per euro after
setting a three-year low against the single currency. 
    The dollar was broadly stronger against the pound, euro and
four other major currencies. It was up 0.7 percent to a 13-day
high against this basket of currencies, helped by an
increase in risk sentiment and an upbeat survey of the U.S.
manufacturing sector that drove investors to raise their bets on
a rate hike by the end of the year. 
    On Tuesday, Richmond Federal Reserve President Jeffrey
Lacker said there was a strong case for raising interest rates
and that borrowing costs might need to rise significantly to
keep inflation under control. 
    U.S. interest rates futures suggested traders saw a 63
percent chance the Fed would raise rates at its Dec. 13-14
meeting, up a touch from late on Monday, according to CME
Group's FedWatch progam. 
    "Good data increases the chances of interest rate rises,"
said Commerzbank currency strategist Esther Reichelt in
Frankfurt, "and when the dollar appreciates, people are jumping
on that train."
    The dollar jumped more than 1 percent to a 13-day high of
102.83 yen on Tuesday on demand tied to rising oil prices
and reduced jitters over the stability of Deutsche Bank
.     
    The Australian dollar showed little reaction to the Reserve
Bank of Australia's widely expected decision to stand pat on
monetary policy, falling 0.4 percent to $0.7642. 
    
    Currency bid prices at 10:54AM (1454 GMT)
 Description  Last           U.S. Close  Pct Change  YTD Pct
                              Previous                Change
                              Session                
 Euro/Dollar  $1.1149        $1.1209     -0.54%      +2.66%
 Dollar/Yen   102.8000       101.6100    +1.17%      -14.68%
 Euro/Yen     114.61         113.92      +0.61%      -13.01%
 Dollar/Swis  0.9816         0.9733      +0.85%      -2.02%
 s                                                   
 Sterling/Do  1.2755         1.2841      -0.67%      -13.46%
 llar                                                
 Dollar/Cana  1.3177         1.3117      +0.46%      -4.78%
 dian                                                
 Australian/  0.7643         0.7670      -0.35%      +5.06%
 Dollar                                              
 Euro/Swiss   1.0946         1.0912      +0.31%      +0.55%
 Euro/Sterli  0.8737         0.8725      +0.14%      +18.60%
 ng                                                  
 NZ           0.7249         0.7274      -0.34%      +6.21%
 Dollar/Doll                                         
 ar                                                  
 Dollar/Norw  8.0052         7.9801      +0.31%      -9.44%
 ay                                                  
 Euro/Norway  8.9244         8.9455      -0.24%      -7.05%
 Dollar/Swed  8.6202         8.5643      +0.11%      +2.50%
 en                                                  
 Euro/Sweden  9.6114         9.6013      +0.11%      +4.44%
 
 (Additional reporting by Jemima Kelly; in London; Editing by
Andrew Heavens and Lisa Von Ahn)

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