* Graphic: sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
(Updates prices, adds quote)
By John Geddie
LONDON, Feb 6 Sterling hit a one-week low
against the dollar on Monday as Prime Minister Theresa May faced
challenges over her legislative plan for taking Britain out of
the European Union.
A three-day debate on a law giving May the right to trigger
Brexit began on Monday and will be followed by a series of votes
on whether to attach extra conditions to her plan to start talks
by March 31.
Lawmakers voted overwhelmingly in favour of the principle of
the new law last week, but Sunday brought the first signs of
internal Conservative Party dissent which could see the bill
amended, damaging May's authority domestically and potentially
giving EU negotiators a powerful lever in the exit talks.
May warned lawmakers not to obstruct the will of voters with
a series of amendments of the Brexit legislation. Her
spokeswoman said the government would not allow attempts to keep
Britain in the EU.
May has said parliament will be given a choice between
accepting the deal she has reached with the EU or rejecting it
and leaving the bloc without any agreement on issues such as
trade and immigration. MPs want to be given more influence.
Dominic Bunning, a currency strategist at HSBC, said the
debate raised the risk of a more chaotic outcome which may deter
foreign investors that Britain relies on to fund a big deficit
in its balance of payments.
"Any signs of a more chaotic outcome, any signs of a more
difficult discussion phase will create downward pressure on
sterling," Bunning said.
"As soon as you get that uncertainty increasing in the UK,
it makes it harder for foreign investors to want to finance the
current account deficit."
Sterling fell as low as $1.2427, its weakest since
Jan. 31, before recovering slightly. In late trade, it stood at
$1.2448, down 0.2 percent on the day.
The pound edged up 0.1 percent against a broadly weaker euro
"The pound is fairly directionless ... there is no strong
trend and it's consolidating at these lower levels," said MUFG
analyst Lee Hardman.
The pound shed 2 percent last weak against the dollar as
investors pushed back their expectations for a Bank of England
interest rate increase and after disappointing services sector
Some traders said the market has also been driven recently
by shifts in positioning.
Shorts on sterling last week fell to their lowest levels in
2017, a move traders said created more room for those investors
to sell the pound.
(Reporting by John Geddie/Nigel Stephenson; Editing byLarry