British Prime Minister Theresa May has asked the European Union to delay Britain's departure until June 30, while the bloc itself suggested that it might be best to postpone the split for up to a year.
As so often before, sheer uncertainty over Britain's future weighed on sterling, but the currency's downside was limited by expectations that the exit from the EU will be softened by some kind of agreement with the bloc.
"As far as most currency traders are concerned the chances of a no-deal remain remote -- but at the same time a satisfactory outcome anytime soon also seems highly unlikely," said XTB analyst David Cheetham.
May also told EU Council president Donald Tusk in a formal letter that Britain would start preparing for its participation in European Parliament elections in case it is still a member of the bloc when they begin on May 23.
- Race against the clock -
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The embattled premier is racing against the clock in a desperate bid to get her deal approved in time for an EU leaders' summit in Brussels on Wednesday, when a formal decision on any extension will be made.
She is also holding a third day of talks with opposition Labour Party leader Jeremy Corbyn to find a way to avert a messy no-deal divorce.
The Brexit current deadline is April 12, which has already been pushed back once from March 29.
"The idea of a longer delay was something of a relief to sterling, given that currently the UK is set to leave the EU next Friday," noted Spreadex analyst Connor Campbell.
In stock market deals London gained as the pound weakened, while neither Paris and Frankfurt had much to show for the day's trading.
On Wall Street, the Dow Jones index rose after the government reported jobs numbers for March well above expectations, a sign of a robust economy that was greeted with much relief after weak numbers a month earlier.
"After disappointment in February, job creation bounced back nicely in March," ING chief international economist James Knightley said.
Asian equity indices mostly rose in holiday-thinned trade on hopes that China and the United States will hammer out a trade deal after both sides sounded notes of optimism.
With top negotiators from the world's top two economies huddled down in Washington for three days of talks, there has been a growing sense they are close to an agreement to end a stand-off that battered global equities last year.
- 'Looking good' -
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US President Donald Trump added to the sense of hope on Thursday when he said the two sides were nearing a successful conclusion.
"We will probably know over the next four weeks. It may take two weeks after that," he told reporters after a meeting with Beijing's top trade envoy and Vice Premier Liu He.
"It's looking very good."
Later Liu said they had "reached a new consensus on important issues", according to China's Xinhua. The news agency also reported that President Xi Jinping had called for the "early conclusion of negotiations".
Both camps have been cautiously optimistic for months, but the last mile is proving to be the hardest as they tussle over whether and when Washington should remove the painful tariffs it imposed on Chinese goods last year.
- Key figures around 1330 GMT -
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Pound/dollar: DOWN at $1.3037 from $1.3077 at 2100 GMT on Thursday
Euro/pound: UP at 86.11 pence from 85.81 pence
Euro/dollar: UP at $1.1229 from $1.1221
Dollar/yen: UP at 111.67 yen from 111.66 yen
London - FTSE 100: UP 0.4 percent at 7,430.86 points
Frankfurt - DAX 30: DOWN 0.1 percent at 11,978.85
Paris - CAC 40: UP 0.1 percent at 5,469.50
EURO STOXX 50: DOWN 0.1 percent at 3,439.89
New York - Dow: UP 0.3 percent at 26,453.99
Tokyo - Nikkei 225: UP 0.4 percent at 21,807.50 (close)
Hong Kong - Hang Seng: Closed for a public holiday
Shanghai - Composite: Closed for a public holiday
Oil - Brent Crude: UP 11 cents at $69.51 per barrel
Oil - West Texas Intermediate: UP 27 cents at $62.37