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By Saikat Chatterjee and Tom Finn
The British currency enjoyed a strong last week after
Such has been the bullishness around the short-term outlookfor sterling that the British currency was trading near Brexitreferendum vote highs against most of its rivals, including theSwiss franc
But news that GlaxoSmithKline will buy Novartis's36.5 percent stake in their consumer healthcare jointventure for
Sterling's fall against the franc rippled over into thebroader market complex with the pound falling 1 percent againstthe dollar and 0.5 percent against the euroas investors took profits before the typically volatile quarterend period.
"We have seen sterling come a long way over the last week so
the deal may well have been the triggerfor some profit taking," said Jane Foley, FX strategist atRabobank in
The British currency was down 0.5 percent against the Swissfranc at
Against the dollar, sterling plunged nearly apercent but is still up more than 4 percent so far this year asinvestors snapped up the pound citing its undervaluationrelative to other currencies.
QUARTER-END FLOWS
Foley said a fall in the pound could also have been causedby quarterly flows as global asset and fund managers rebalancetheir portfolios, a move that can distort markets.
"There is a fair amount of sterling that has to be soldagainst the Swiss franc and we are at post-Brexit referendumvote highs," said John Marley, head of FX strategy at InfinityInternational, a currency risk management firm.
On a trade-weighted basket basis, the poundwas trading at two-month highs above 80.
A revival in risk appetite in the broader markets alsounderpinned sterling's gains in the previous session.
Global markets were shaken this month after
Derivative markets were signalling bullishness for sterlingin the short term with three-month risk reversals for theBritish currency - a ratio of calls to puts --trading at their highest level in more than a month.
"While the attraction of the euro in part reflects itsstructural large current account surplus, the pound isbenefiting more from expectations of positive cyclicaldevelopments," MUFG strategists wrote in a daily note.
(Editing by Mark Heinrich)
