Sterling near 2016 highs on expectations Britain will stay in EU
Sterling climbed to its highest since early January against the dollar on Tuesday, after opinion polls suggested the campaign to keep Britain in the European Union was edging back into the lead.
Two opinion polls on Monday indicated the "Remain" camp has regained some ground before Britain holds its June 23 referendum on whether to remain a member of the EU. However, a third poll found the "Leave" campaign ahead by a whisker.
The implied probability of a "Remain" vote in Thursday's referendum was around 76 percent, up from as low as 60 percent last Thursday, according to odds from gaming website Betfair. For the latest Reuters news on the referendum including full multimedia coverage, click.
Sterling rose to $1.4788, its highest since early January, when it traded at $1.4815. On Monday, it climbed 2.1 percent against the dollar, its biggest one-day gain since late 2008, as investors and speculators cut bets against the pound.
"Some of the recent events have been favorable for Britain to remain in the EU, but it's still too close to call," said Manuel Oliveri, currency strategist at Credit Agricole. "We are advising our clients to go neutral into the vote, although we remain constructive. If "Remain" wins, we expect sterling to rise to $1.55."
But a vote to leave would trigger a more disruptive sterling devaluation than its decline in 1992, said George Soros, who made a billion dollars betting against the pound that year. On "Black Wednesday" - Sept. 16, 1992 - sterling plunged 15 percent when Britain was forced out of the EU's Exchange Rate Mechanism, a precursor to the introduction of the euro.
Soros said the pound would fall at least 15 percent and possibly more than 20 percent, to below $1.15, if Britain opted to leave.
The euro lagged the pound's rise, falling to a three-week low of 76.67 pence.
Against the dollar, the euro was slightly higher at $1.1327, having moved in recent days in sympathy with the pound. Traders expect the euro to gain against most major currencies if Britain chooses to stay in the EU.
Traders said a ruling by Germany's top court that rejected a legal challenge to an emergency ECB bond-buying scheme was broadly in line with expectations and had little effect on the euro.
The dollar index stood at 93.588, holding above a one-month low of 93.425 reached earlier this month, as the market awaited Federal Reserve Chair Janet Yellen's testimony before the U.S. Senate Banking Committee at 1400 GMT.
She is likely to strike a balanced note and flag some of the uncertainty from the Brexit vote.
"The testimony couldn't come at a more awkward time, both because the Fed was caught wrong-footed in its hawkish guidance and due to the overhanging uncertainty from the UK referendum vote," said John Hardy, chief strategist at Saxo Bank.
"But the market will still look for a clue or two on how the Fed positions itself in a hypothetical recession scenario, if that question pops up from lawmakers."
The dollar was last up 0.7 percent to 104.61 yen. (Editing by Larry King)
