* Graphic: Sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling index tmsnrt.rs/2hwV9Hv
(Recasts after May comments)
By John Geddie
LONDON, Dec 19 Britain's pound recovered around
half of its earlier losses against the dollar on Monday after
Prime Minister Theresa May said the country could cover EU
funding when it leaves the bloc.
Sterling had earlier shed as much as 1 percent on
uncertainty over how the country will help businesses manage its
exit from the European Union, and the rising risk of a second
Scottish independence referendum.
But it pared some of those losses after May told parliament
that Britain will match funding from the EU if it represents
good value for money, weeks after Brexit minister David Davis
said the UK could contribute to the EU budget in return for
access to the single market.
"It's just another sign that the government is trying to
alleviate fears of a hard, cliff-edge Brexit. Whenever you get
signs like that, sterling jumps," ING currency strategist Viraj
Trade minister Liam Fox said on Sunday Britain may need a
transitional agreement to bridge the gap for firms during
negotiations with the EU, while the Financial Times reported
that EU Brexit negotiators are insisting Britain agree to its
European divorce settlement before any such transitional deal.
In a sign of how British firms have been shaken by Brexit, a
survey showed half of employers think the country's
attractiveness as a place to invest and hire will diminish over
the next five years as it leaves the EU.
Brexit has also fed concerns over the prospect of another
independence referendum in Scotland, which strongly backed EU
membership in June's Brexit vote.
The Scottish government on Sunday said it would this week
publish proposals for how it can remain in the EU's single
market after Britain leaves the bloc, in order to avoid the
"national disaster" of a "hard Brexit".
By 1705 sterling was trading down half a percent on the day
at $1.2416, having fallen to as low as $1.2355 as May began
speaking to parliament, while the greenback held close to its
highest level in 14 years against a basket of currencies.
The pound has shed nearly 2 percent against the dollar over
the past two weeks and has lost almost 17 percent since the vote
for Brexit in June.
Against the euro, sterling was down 0.5 percent in the day
at 84.10 pence, having earlier struck a 10-day low of 84.50
pence, staying within sight of a five-month low of 83.02 pence
The Bank of England's trade-weighted broader measure for the
currency closed at an 11-day low of 78.2.
"The pound has been dribbling lower as the EU debate
trundles on," Societe Generale currency strategist Kit Juckes
"The sense you get is that the UK negotiators still want to
have their cake and eat it ... and we may have seen most of the
optimism that this is going to go well come and go at this
The latest data from the Commodity Futures Trading
Commission showed investors continued to reduce bets against
sterling, with net shorts at their smallest since the third week
(Additional reporting by Jemima Kelly; Editing by Toby Chopra)