Sterling rises after killing of pro-EU British lawmaker

(Updates prices, adds quote)

By Gertrude Chavez-Dreyfuss

NEW YORK, June 16 (Reuters) - Sterling rallied from a two-month low against the euro on Thursday and rose versus the dollar, extending gains after British police said Jo Cox, a lawmaker for Britain's opposition Labour Party, had died after being attacked earlier in the day.

Cox was one of the members of parliament advocating for Britain to remain in the European Union, an issue that will be decided in a referendum next week. Cox was attacked as she prepared to hold a meeting with constituents in Birstall near Leeds.

EU referendum campaigns were suspended on Thursday following Cox's killing, with the pro-EU Remain camp falling behind the Leave camp in polls.

With (Other OTC: WWTH - news) the tightly fought campaign entering its final week, polls for London's Evening Standard newspaper and retail brokers IG (LSE: IGG.L - news) .com gave three and six-point leads to the leave camp ahead of next Thursday's vote. Bookmakers now put the odds of leaving the EU, a result that would send a shockwave through global financial markets, at 37 percent.

"There is a sense in market that this (incident) could be the difference between a Brexit and not a Brexit," said Adam Button at ForexLive.com in Montreal.

"Jo Cox was in favour of Britain remaining in the EU and the attack may have been motivated by someone on the leave or Brexit side."

In late afternoon trading, the euro fell 0.2 percent against sterling on the day to 79.06 pence, after hitting a two-month peak of 79.94.

Sterling rose 0.2 percent against the dollar to $1.4210 after trading lower for most of the session.

"It (Other OTC: ITGL - news) 's possible that investors are anticipating something of a sympathy bump for the 'Remain' camp in the context of this," said Shaun Osborne, chief currency strategist at ScotiaBank in Toronto.

Brian Jacobsen, chief portfolio strategist at Wells Fargo (Hanover: NWT.HA - news) Funds Management in Menomonee Falls, Wisconsin, said an event like this matters ahead of the referendum, although he was not sure it would be enough to shift the odds to the "Remain" camp. (Editing by Ruth Pitchford and Steve Orlofsky)