LONDON: Sterling slipped on Monday after gaining over 1 percent against the dollar last week as investors, still worried that a looming June 23 referendum could see Britons vote to leave the European Union, moved away from riskier assets.
The currency showed little reaction to warnings from Prime Minister David Cameron and finance minister George Osborne that a vote to leave the EU could push Britain into a year-long recession and cost at least half a million jobs.
But having earlier traded as high as $1.4550, by 1145 GMT sterling had slipped back to $1.4484, leaving it down 0.1 percent on the day, as stocks and other riskier assets fell.
Sterling tends to perform badly at times of risk aversion because of the huge investment flows Britain relies on to balance its more than 5 percent current account deficit. Flows dry up when investors are worried about growth and market stability - jitters that are heightened by any developments that make a Brexit look more likely.
Several polls last week put the "In" camp well ahead in the run up to the June 23 vote, easing some fears and driving bookmarkers to widen their odds on a Brexit to about 7/2, indicating a 22 percent chance.
That, along with a robust UK retail sales report for April, boosted sterling to a 3-1/2-month high against a trade-weighted basket of currencies. But strategists said Britain's currency would be vulnerable in the coming weeks.
"After last week's surprise sterling outperformance, we think that it is only a matter of time before the summer buzz wears off and reality kicks in," ING currency strategist Viraj Patel said, adding that "Brexit" would continue to dominate debate.
"While a flurry of polls last week placed the 'Remain' campaign comfortably in the lead, clear evidence of a divide in sentiment among various demographic groups is concerning as it makes the outcome particularly vulnerable to voter turnout."
Against the euro, sterling was flat at 77.395 pence .
Brexit concerns drove the pound down 11 percent on a trade-weighted basis between mid-November and early April, when it hit a 2 1/2-year low, but it has since recovered almost 5 percent.
"The probability of exit implied by the UK bookmakers' quotes is close to its lowest level since the UK general election last May," RBC Capital Markets strategist Adam Cole wrote in a research note to clients.
"This may leave sterling open to a correction lower if online polls continue to suggest little change in sentiment."
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