Pound steadies above $1.23 after wild few days

* Sterling claws above $1.23 as dollar rally fades

* Finance minister repeats UK will need to stay competitive

* PM May speaks at Davos, says wants ambitious trade deal

* Graphic: sterling and gilt yields http://bit.ly/2dgAXn1

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Marc Jones

LONDON, Jan 11 (Reuters) - The pound steadied on Thursday after a few days in which uncertainty about Brexit has seen both its biggest rise in decades against the dollar and two of its heaviest slumps in months.

Sterling climbed back above $1.2320, having been knocked as low $1.2254 overnight by a dollar rally after Federal Reserve head Janet Yellen flagged the likelihood that U.S. interest rates will go up for the next few years.

The pound also climbed against the euro, nudging 0.3 percent higher to 86.47 pence per euro as traders waited to hear from President Mario Draghi at the European Central Bank's first meeting of the year.

"Anyone who thinks sterling is a buy here and thinks the plan May laid out this week (which triggered a 3 percent surge in sterling) will signal the bottom, should look how it traded yesterday through what were quite strong wage numbers," said Nomura FX strategist Jordan Rochester.

With (Other OTC: WWTH - news) the start of Britain's negotiations to leave the European Union due to start by the end of March, the pound is set to remain highly sensitive to the talks and to data, Rochester said.

Britain's prime minister and finance minister also spoke at a gathering the World Economic Forum's meeting in Davos, Switzerland, repeating that the UK wanted "ambitious" post-Brexit trade deals and that it would allow firms time to adjust to the new setup.

New (KOSDAQ: 160550.KQ - news) data, however, showed that Britain's housing market had its weakest month since just after June's Brexit vote in December.

Two of Europe's biggest banks, HSBC and UBS (LSE: 0QNR.L - news) , also warned on Wednesday that they could each move about 1,000 jobs out of London, while Germany's Handelsblatt newspaper reported U.S. investment bank Goldman Sachs (NYSE: GS-PB - news) had similar plans.

"We have to remain competitive. The best way to do that is to have a comprehensive trading relationship with the European Union, our closest neighbours," Britain's finance minister Philip Hammond told Reuters.

(Editing by Jeremy Gaunt)