LONDON: Sterling fell against the dollar, hovering near a 17-month low struck earlier on Monday, as subdued economic data bolstered bets that the Bank of England will not raise interest rates until 2016.
The pound was also hurt by growing political uncertainty after Prime Minister David Cameron said on Sunday that he would like to bring forward a planned referendum on Britain's membership of the European Union from 2017 if possible.
The pound dropped to $1.5185 in early Asian trade, its weakest since early August 2013, before recovering to trade at $1.5300, still down 0.15 percent.
On Friday, it suffered its steepest fall in 4-1/2 years after a monthly survey of UK purchasing managers (PMI) showed the manufacturing sector expanded at a much slower pace than expected in December.
Data on Monday showed Britain's construction sector grew at its slowest rate since July 2013 last month. The Markit/CIPS construction purchasing managers' index fell to 57.6 in December from 59.4 in November, and well below economists' forecasts of a slight decline to 59.0.
"The soft data underlines that Britain's manufacturing exports will remain soft," said Nawaz Ali, analyst at Western Union. "Short term, we could see a retracement, but 2015 remains a year when the dollar will strengthen."
Sterling has shed over 10 percent since hitting a six-year peak just below $1.72 in July, as investors have pushed back bets on when the BoE will start raising interest rates.
The latest batch of data has push those expectations further into the future, with many betting the bank rate, which has stood at 0.5 percent since March 2009, will not be raised this year.
Analysts also highlighted the risk to the currency from a general election in May, which could open the door to an eventual British exit from the European Union. That would be a "huge negative" for sterling, traders said.
Commerzbank analyst Peter Kinsella said that a possible exit by Britain could hurt investments into the UK.
"This is especially true of U.S. companies intending to use the UK as a base for their European operations. It is through this channel that we think the majority of sterling weakness could come over the medium to longer term," he said.
Against the euro, sterling rose 0.2 percent to trade at 78.10 pence. The single currency was trading below $1.20 against the dollar on growing expectations that the European Central Bank will loosen policy early this year.
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