Sterling soars to 12-week high as investors dump dollars

By Jemima Kelly

LONDON, April 29 (Reuters) - Sterling hit its strongest in 12 weeks against the dollar on Friday, as investors sold the greenback on the back of a cautious tone on future interest rates from the U.S (Other OTC: UBGXF - news) . Federal Reserve earlier in the week.

On the final trading day of the April, the pound was on track for a second straight month of gains - the first time that has happened since late 2013. On a weekly basis, it was heading for its best performance since early March.

That was despite persistent concerns that a June 23 referendum will lead to a vote for Britain to leave the European Union, which most economists reckon would deal a blow to the British economy and to the currency.

The latest YouGov (LSE: YOU.L - news) poll for the Times, on Thursday, showed the "Out" camp edging into the lead, despite an intervention on the "In" side by U.S. President Barack Obama.

Sterling climbed to as high as $1.4665 on Friday, its strongest since early February, before easing back a little to $1.4613, up 0.1 percent on the day. That left it on track for a 1.5 percent weekly gain.

"Sterling outperformance over the last week and a half or so has been driven by diminishing expectations of UK exit, and that's not driven by anything in particular in terms of polling evidence," said RBC Capital Markets head of currency strategy Adam Cole.

"The onus is really now on the polling evidence supporting what the market has done over the last week and a half, and the risk is that it doesn't."

Bookmakers' odds have consistently shown a vote for "Remain" the most likely outcome of the ballot, with betting website Betfair putting the chances of a Brexit at around just 30 percent. Those odds, closely watched by investors, have lent support to the pound.

Against the euro, sterling was a third of a percent weaker on Friday at 77.93 pence.

Analysts said the pound's weakening against the euro suggested its gains against the dollar were mostly driven by investors selling the U.S. currency.

"The market is pushing hard into the $1.4664 February high, this is tough overhead resistance," wrote Commerzbank (Xetra: CBK100 - news) analysts in a technical analysis note. "While it caps, we will retain our overall negative bias, however a close above $1.4664 will neutralise our outlook and trigger a move to at least $1.4880." (Reporting by Jemima Kelly; Editing by Toby Chopra)