* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
LONDON, Sept 11 (Reuters) - The pound rose against the dollar on Friday, bobbing above the $1.28 mark after a week in which new Brexit friction between Britain and the European Union put the currency on track for its worst week since March’s coronavirus-led market selloff.
1-month implied volatility on the pound, an options market gauge of expected future price swings in the currency, remained elevated near 5-month highs at 11.5%.
Brexit has returned to dog the pound this week as Britain introduced new draft legislation that it acknowledged would be inconsistent with international law, angering the EU.
Investors fear this may derail trade talks with the bloc before an Oct. 15 deadline set by Britain, for reaching a trade deal with the EU.
Investors also fear a derailment of talks might lead to a chaotic “no-deal” Brexit, for which both Britain and the EU have stepped up preparations.
By 0753 GMT, sterling traded 0.2% higher to the dollar, stabilizing above the $1.28 mark at $1.2825, but still on track for a 3% loss this week.
It traded flat against the euro at 92.29 pence.
“There is now a good degree of uncertainty now priced - relative to last week where very little was priced in. But with investors having been burnt plenty of times in the past trying to catch a falling pound knife - we think that some stability would require no additional Brexit headline risks,” said Viraj Patel, global macro and currency strategist at Arkera.
“It’s hard to say that we’ll get this - but some relative quiet on the Brexit news front will do the pound a world of good. Either way, risks remain skewed to the downside with one or two Brexit-driven sell-offs still left in sterling/dollar above $1.27.”
UBS Global Wealth Management said on Friday said it maintained its year-end sterling/dollar forecast at $1.35.
“This hitch in EU-UK negotiations has added near-term pressure on the pound,” the asset manager said in a note to clients. “We stick with our main scenario that a deal will eventually be made, but we are braced for this to come at the last possible moment.”
Reporting by Ritvik Carvalho, Editing by Timothy Heritage
Our Standards: The Thomson Reuters Trust Principles.