* Sterling back on defensive after recovery from flash crash
* Mexican peso strengthens after bumps on Trump campaign
(Updates prices, adds quotes)
By Patrick Graham
LONDON, Oct 10 The British pound steadied on
Monday as the dollar took back some of Friday's losses against a
range of currencies, while the Mexican peso surged after the
damaging publication of a video of Donald Trump making vulgar
comments about women.
The Bank of England's trade-weighted index, which did not
price during sterling's 10 percent off-session crash in Asia on
Friday, hit its lowest since 2009 as worries about the impact of
Britain's exit from the European Union continued to weigh.
After its initial morning wobble, however, the pound was
more stable than last week.
"I believe that sterling should eventually go lower. How
much lower though? I don't think we will get below the 1.15-
1.18 level we saw a few days ago in the near-term," said Brian
Tomlinson, an Allianz senior fixed-income portfolio manager.
"Anything north of $1.2620 you are going to see a lot of
short-covering by short-term traders. My concern is that price
action is now actually stable and it actually feels like it
wants to try the upside in the short term."
By midday in London, the pound was trading only 0.1 percent
lower than Friday's U.S. close at $1.2418 and gained a
quarter of a percent to 89.87 pence against the euro.
That compared with the flash crash lows of $1.1491 and 94.03
pence per euro, Reuters data shows.
The Mexican peso, which has been pressured since May by
Trump's promises to clamp down on immigration and rethink trade
relations, surged as markets trimmed the chances of a victory
for the Republican nominee in next month's elections.
The Mexican currency rose about 2 percent to 18.91
to the U.S. dollar in early Asian trade -- its highest level in
nearly a month -- and held on to the bulk of its gains after the
second presidential debate between Trump and Democrat Hillary
It last stood at 19.018, still up about 1.5 percent.
The peso is unlikely to break above the trading ranges seen
since June, even if more position-squaring takes place, said Wu
Mingze, FX trader of global payments for financial services
provider INTL FCStone in Singapore.
"A full-unwinding of the 'Trump Trades' should only bring us
to the levels between the 18.00-19.00 consolidation zone," he
In a video released on Friday, Trump is heard talking on an
open microphone in 2005 about groping females and trying to
seduce a married woman.
The controversy pitched Trump into the biggest crisis of his
16-month-old campaign and deepened fissures between him and
The Canadian dollar rose by about 0.2 percent to C$1.3268 to
the U.S. dollar, edging away from Friday's low of C$1.3315, its
lowest since mid-March.
"The Brexit vote has ushered in a new and more dangerous
phase for markets in which political developments have a much
stronger bearing on sentiment," said Nicholas Spiro, a partner
at London-based consultancy Lauressa Advisory.
"While the Mexican peso -- the most liquid emerging market
currency and the most reliable gauge of 'Trump risk' -- has
given sterling a run for its money this year, it's the pound
that has become a proxy for politically driven volatility in
(Additional reporting by Marc Jones in LONDON and Masayuki
Kitano in SINGAPORE; Editing by David Goodman)