* 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
By John Geddie
LONDON, Feb 6 Sterling hit a one-week low
against the U.S. dollar on Monday, adding to a near 2 percent
fall last week, as Prime Minister Theresa May faced challenges
over her legislative plan for taking Britain out of the European
A three-day debate on a law giving May the right to trigger
Brexit begins 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, yet 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 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," said Bunning.
"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 to $1.2450 in early trades, its lowest since
Jan. 31, before recovering slightly. At 0920GMT, it was down 0.1
percent at $1.2472. It was marginally higher against a broadly
The pound shed 2 percent last weak against the U.S. dollar
last week as investors pushed back their expectations for a Bank
of England interest rate hike and after disappointing services
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 that traders said created more room for those
investors to sell the pound going forward.
(Reporting by John Geddie; Editing by Andrew Heavens)