Sterling dipped against the low-yielding yen and the dollar on Friday, as investors pondered the prospect of a prolonged economic downturn after recent financial market turmoil, prompting them to shun riskier assets. Trade lacked direction as investors stuck to consolidating gains made earlier in the week after sharp gyrations in currency markets.
Share prices were volatile as European stocks pared sharp gains seen at the open. By 1401 GMT, Britain's FTSE was up 2.8 percent, up on the day but erasing much of its early gains. The low-yielding yen gained broadly against major currencies as investors unwound riskier bets. Sterling was down 0.8 percent at 174.55 yen after hitting a low of 174.00 yen.
The pound was little changed at $1.7294 after sliding as low as $1.7252, and the euro was flat 77.75 pence. "Cable has benefitted from the UK's proactive response to the banking crisis, but the focus will turn to how quickly these measures can be implemented," said Tom Levinson, forex strategist at ING in London. Sterling remained well above a 5-year low against the dollar hit last week as investors perceived the UK government has taken major strides in stemming a banking crisis here.