Pound defies Brexit fears, hitting January highs against dollar

The pound sterling has hit highs last seen in January during intraday trading on Tuesday (21 June), thereby extending the previous session's gains.

At one point, the pound was changing hands against the US dollar at $1.472, the highest since 4 January, which was the first foreign exchange trading day for the year. However, a correction followed in late afternoon trading, with the British currency fetching $1.4689 down 0.06% on the session at 3:38pm BST . The pound also surged against the euro exchanging at €1.3049, up 0.46%

Opinion polls for the UK's EU referendum still point to a close verdict, but have of late started suggesting that public momentum was with the 'Remain' rather than the 'Vote Leave' campaign.

Meanwhile, a spokesperson for Betfair told IBTimes UK that the betting market was now leaning in favour of a remain vote with a 78% chance of that happening. It represents a complete turnaround from Friday when the bookmaker noted a 65% chance of a Brexit vote.

Improved public borrowing figures, published by the Office for National Statistics, earlier in the session also supported the pound. Excluding Treasury support for state-owned banks, public borrowing for May came in at £9.7bn ($14.3bn, €12.6bn), down £0.4bn from last year, and lowest on record for the month since May 2007, the statistics body noted.

Traders say a vote in favour of staying in the EU could see the pound rally as high as $1.53-$1.56 and €1.31 and €1.34 versus the dollar and euro respectively.

Kit Juckes, head of foreign exchange at Societe Generale, said there will be more ebbing and flowing in polls and sentiment but for now, pound sterling shorts are still being squeezed.

"The rest of the markets are being led by the UK referendum mood. So, Asian equities are up again and the only two currencies that are weaker against the dollar are the yen [again] and the Rupee [also for a second day]."

Jane Foley, senior foreign exchange analyst at Rabobank, cautioned against buying too much into the recent rally.

"The pound is massively vulnerable if there is a vote to leave. Unless there is an emphatic vote to remain in the EU, a lot of uncertainty will persist, and that could mean that the pound's rally could fizzle out quite soon."