By Saikat Chatterjee
BARCELONA, Spain, Sept 13 (Reuters) - Daniel Chambers, headof trading at Sequoia Capital Fund Management, has stoppedtrading the pound in his nearly $200 million systematic currencyportfolio over the course of the year because of the Brexitheadline risk.
The pound has had a roller-coaster ride this year asthe course of Brexit negotiations has been the single biggestfactor for trading the currency, causing many large investors -as well as Bank of England Governor Mark Carney - to say thevolatility is equivalent to that of an emerging market currency.
"There is too much uncertainty on the pound. A headline cantake out all the reason why you bought the currency in the firstplace on fundamental views," said Chambers, who trades mainlyG10 currencies, including the dollar, euro and Swiss franc.
His cautious view on the pound was shared by many at theTradetech conference in Barcelona, where some of the world'sbiggest names in the $5.1 trillion foreign exchange marketgather annually to talk about the major themes in the industry.
Sunil Patil, a senior trader at Amsterdam-based APG AssetManagement which invests 505 billion euros ($559.24 billion) forpension funds, said positions on the pound tend to be extremelyshort-term in nature.
"We are seeing there is very little appetite in the marketto carry long-term risk on the pound because of the Brexituncertainty," he said.
Prime Minister Boris Johnson says Britain must leave theEuropean Union on Oct. 31, whether he reaches an exit deal ornot, but parliament passed a law last week over his objectionsordering him to seek an extension if he fails to reach anagreement with the bloc.
On Friday Johnson said there was the "rough shape of a dealto be done" over Brexit but Ireland's Prime Minister LeoVaradkar played down the prospects, saying the gap betweenBritain and the EU remained "very wide".
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Since hitting a 2019 high of near $1.34 against the U.S.dollar in March, the pound collapsed to a three-year low ofbelow $1.20 earlier this month on increased concern that Britainwill crash out of the EU without a deal.
Though those concerns have eased somewhat this week, liftingthe pound to near $1.25 on Friday, realised volatility in thepound or daily price moves have been double that of its majorpeers such as the dollar and the euro.
That high volatility can sap demand from investors who mayotherwise find the currency attractive based on other factors.
"Pound volatility has been far more than its other G10 peersand that means some investors are staying away from it," saidJohn Turney, global head of foreign exchange at Northern Trust.
"As long as that volatility remains high, that willremain."
That caution towards the pound is reflected in latest weeklypositioning data.
Latest weekly futures data reveals investors have trimmedback some of their short bets against the currency.
Sven Schubert, a director of specialist investment strategycurencies at Zurich-based Vontobel, said though the pound looksattractive on a fundamental basis such as trade-weightedvaluations and yield spreads, the Brexit uncertainty is a bigdeterrent.
"Yes, there has been a rally this week in the pound but totake exposure in the currency when there is so much of aheadline risk attached to it may be tricky," Schubert said.
On a 10-year average of its historical trade-weightedvaluation the pound is undervalued by more than 10 percent,according to Bank of England data.
($1 = 0.9030 euros)
(Reporting by Saikat ChatterjeeEditing by Gareth Jones)