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US dollar pressured by sterling's rebound from selloff

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The US dollar slumped in early Asian trading on Wednesday, pressured by sterling's partial rebound from its dramatic losses in the previous session.

[TOKYO] The US dollar slumped in early Asian trading on Wednesday, pressured by sterling's partial rebound from its dramatic losses in the previous session.

The pound was up 1.4 per cent at US$1.2287, after tumbling as low as US$1.2086 on Tuesday, heading towards last Friday's 31-year low of US$1.1450 hit as investors feared the impact on Britain from quitting the European Union.

Sterling benefited from a Bloomberg report that British Prime Minister Theresa May has accepted that Parliament should be allowed to vote on her Brexit plan.

"May will accept voting at the Parliament, which is giving the pound a short-term boost, but I'm not sure it's long-lasting," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo. "Its latest fall was too much and too rapid, so it's natural to see some rebound," he said.

"It seems the US dollar's weakness against sterling today is affecting the other US dollar currency pairs as well, which is also natural."

The US dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.2 per cent to 97.533 after rising as high as 97.758 on Tuesday, its loftiest peak since March.

The US dollar edged down 0.1 per cent to 103.40 yen, while the euro was steady at US$1.1054, recovering from a dip as low as US$1.1049, its deepest nadir since early August.

The US dollar had been on an upswing due to rising expectations that the US Federal Reserve would raise interest rates as early as this year, with markets pricing in around a 70 per cent chance of a hike in December.

Investors awaited the minutes of the Federal Reserve Open Market Committee's September meeting, scheduled to be released later on Wednesday, as well as US retail sales data on Friday, for clues as to how close the US central bank is coming to hiking interest rates.

The US dollar has also benefited as Democratic presidential nominee Hillary Clinton widened her lead in opinion polls over Republican rival Donald Trump.

REUTERS