Sterling above $1.33 as UK manufacturing rebounds from Brexit shock

(Releads after U.S (Other OTC: UBGXF - news) . data, updates prices)

By Anirban Nag

LONDON, Sept 1 (Reuters) - Sterling gained more than 1 percent to trade above $1.33 for the first time in four weeks on Thursday, after data showed the British manufacturing sector staged one of its sharpest rebounds on record in August.

The pound extended gains in afternoon trade in London after a similar survey on the U.S. manufacturing sector unexpectedly showed a contraction in activity, leading to a sell off in the dollar and a trimming of expectations of a near term rate hike by the Federal Reserve.

In Britain, the Markit (NasdaqGS: MRKT - news) /CIPS Purchasing Managers' Index (PMI), a closely watched gauge of factory activity, jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July after Britain's June 23 vote to leave the European Union.

August's headline rise matched the biggest month-on-month increase in the survey's nearly 25-year history, Markit said.

Sterling rallied 1.3 percent to $1.3318, its highest since early August and up from $1.3152 before the UK survey was released. The euro fell to 83.885 pence per euro , down from 84.68 pence before the survey was released.

"Certainly this is great news for the British economy and a sign that the Bank of England need not push for any further accommodation in the coming months," said Neil Wilson, market analyst at ETX Capital, adding the focus was turning to the services sector PMI survey, due on Monday.

Services play a far larger role in the British economy than manufacturing.

"The omens are good, with consumer spending very robust. However, let's remember that Brexit negotiations have not even begun yet so there is still plenty of time for things to turn south," Wilson (Oslo: WILS.OL - news) said.

Sterling has performed reasonably well in the past few weeks, holding above a 30-year low of $1.2798 struck on July 8, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following the shock Brexit vote.

Surveys this week showing improved consumer confidence and a rise in British house prices in August have added to signs the economy is holding up well.

"Today's PMI reading will see a continuation of buying as the pound gets an infusion of confidence," said Richard de Meo, managing director of Foenix Partners, a firm that offers currency hedging solutions to British companies.

The British 10-year gilt yield rose to hit its highest level in a month and was last trading at 0.692 percent, having climbed to a high of 0.721 percent earlier in the day. (Reporting by Anirban Nag; Editing by Jeremy Gaunt)