Sterling's Scotland-related gains vs dollar evaporate

2014-10-13

(Reuters) - Sterling fell back against the dollar on Friday to stand lower on the day, handing back all of its gains since the first signs overnight that Scotland was voting "No" to splitting off from the United Kingdom.

The pound fell past $1.64 to trade at a day's low of $1.6360 , down 0.2 percent on the day and off a two-week high of $1.6525 struck in Asia.

Traders said much of the positive effect of the Scots' vote had already been priced in by speculation late on Thursday and that the pound was likely to struggle against the dollar given the Federal Reserve was inching towards tightening interest rates.

The Scottish vote also raises new constitutional problems for Britain, adding to uncertainty about whether UK growth prospects justify expectations of a rise in interest rates from the Bank of England by early next year.

"Important from a UK economic perspective, one should note a Scottish 'No' is not a vote for the status quo," said Adam Myers, head of EMEA G-10 currency strategy at Credit Agricole.

"As such some devolution uncertainty will remain, distracting investors' attention from superior UK growth relative to Europe and thus mitigating some of our forecasts for sterling gains somewhat during the fourth quarter."

Against the euro, sterling was still around 0.2 percent firmer at 78.67 pence per euro.