Sterling stalls ahead of vote to delay Brexit; dollar ticks up

By Kate Duguid

NEW YORK (Reuters) - The U.S. dollar gained on Thursday for the first time in a week, albeit modestly, as the pound stalled at lower levels ahead of a vote to extend Britain's March 29 deadline for exiting the European Union.

The pound was down 0.54 percent at $1.3266 in afternoon American trade as Prime Minister Theresa May piled pressure on rebel lawmakers on Thursday to back her battered European Union divorce deal as parliament prepared to vote on seeking a delay to Britain's departure that could ultimately derail the process.

A day earlier, the British currency soared nearly 2 percent and reached nine-month highs after lawmakers voted against a potentially disorderly "no-deal" departure from the EU.

Analysts cautioned against putting large positions on sterling due to lingering uncertainty about Brexit.

"With the uncertainty around (Brexit), it's not a time ... to take sizeable positions. The risk/reward still favors waiting for some clarity," said Charles Tomes, senior investment analyst at Manulife Asset Management.

The dollar index, a gauge of its strength against six other major currencies, was up 0.22 percent at 96.757. It had fallen overnight, at one point brushing a nine-day trough of 96.385.

The number of Americans filing for unemployment benefits increased more than expected last week, suggesting the labor market was slowing, but probably not to the extent implied by a near-stall in job growth in February.

Other U.S. data showed import prices in February rose by the most in nine months. Still, the inflation trend remained weak as import prices dropped on a year-on-year basis for a third straight month. The data remained supportive of the Federal Reserve's pledge to be "patient" before raising interest rates.

"In the foreign exchange market overall there's not a lot of conviction" at the moment, said Tomes. "Volatility is low and people don't want to put on sizeable positions either way."

The Australian dollar fell to its lowest in three days after reports that China and the United States had delayed a meeting to end their trade war. The meeting between President Donald Trump and President Xi Jinping will not occur this month and is more likely to happen in April at the earliest, Bloomberg reported. It was last at $0.7061, down 0.54 percent on the day.

Investors are worried that any escalation in the trade conflict will pummel export-oriented economies like Australia, whose biggest trading partner is China. The yuan was relatively stable in the offshore market, down 0.31 percent at 6.7230.

(Reporting by Kate Duguid and Tom Finn; Editing by James Dalgleish)

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