FOREX-Sterling slips from 5-month high on Brexit delay jitters

* Sterling falls 0.6% in Asian trade
* British parliament votes to force Brexit delay
* PM Johnson sends EU unsigned letter seeking Brexit
extension
* UK says Brexit will happen on Oct. 31
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake
SYDNEY, Oct 21 (Reuters) - Sterling fell over half a percent
against the dollar on Monday, slipping from five-month highs
after the British parliament delayed a crucial vote on a Brexit
withdrawal agreement.
The move derailed Prime Minister Boris Johnson's plan for a
decision on his withdrawal deal, but the pound held the bulk of
its recent rally on confidence that a disorderly exit from the
European Union would be avoided.
In Asian trade, the pound GBP=D4 fell 0.61% to $1.2910,
having hit a five-month peak of $1.2990 on Friday and closing
the week just below the $1.30 mark, a 6.5% surge since Johnson
struck an EU divorce deal on Oct. 10.
Lawmakers on Saturday voted to withhold a decision on
Johnson's deal, a move that forced him to seek from the EU a
third postponement of Britain's departure from the bloc.
Britain's exit had been envisaged for Oct. 31. But Johnson added another note saying he was opposed to an
extension and British government minister Michael Gove said on
Sunday that Brexit will happen by Oct. 31 as the government
seeks to get the Brexit bill through parliament.
Analysts said market focus will turn to this week's vote on
Johnson's deal. Foreign Secretary Dominic Raab told the BBC
overnight that he was confident enough lawmakers would back the
deal this week.
"The weekend's events, if anything, have further reduced the
risk of disorderly exit," said Adam Cole, chief currency
strategist at RBC Capital Markets in London.
"If there is a knee-jerk negative reaction in the pound as
we emerge from the weekend with a greater overhang of
uncertainty than hoped and some of the long positions are
unwound, it should be faded soon."
The European Union will play for time rather than rush to
decide on London's reluctant request to delay Brexit again,
diplomats said on Sunday. While weary of the Brexit process, EU leaders are keen to
avoid a disorderly exit and are unlikely to reject the request.
They hope the deal can eventually be approved in London.
Goldman Sachs GS.N said on Sunday that it lowered the
probability of a no-deal Brexit to 5% from 10% and maintained
its baseline view that the UK will leave the EU on Oct. 31.
"The uncertainty is likely to weigh on sterling when trading
resumes in Asia Pacific on Oct. 21. Volatility will remain
elevated until a clearer picture emerges," said Marc Chandler,
chief market strategist at Bannockburn Global Forex in New York.
Implied volatilities on sterling options GBPVOL= were
mostly little changed in early Monday, with one-month
volatilities quoted at 11.600/14.200% GBP1MO= .
Risk reversal spreads widened slightly in favour of sterling
puts, pointing to investors' caution over the pound's fall.
Elsewhere, currency moves were limited as investors pondered
the shifting scenarios for Brexit.
The euro eased 0.13% to $1.1159 EUR= versus the greenback,
off Friday's two-month high of $1.1172.
The dollar was little changed at 108.48 JPY= to the
safe-haven yen, still not far from its 2-1/2-month high of
108.94 yen marked on Thursday.
"Although many eyes are still on Brexit, there is not so
much nervousness in the market as the risk of a no-deal Brexit
has actually reduced over the weekend," said Shinichiro Kadota,
senior forex and rates strategist at Barclays in Tokyo.
"Apart from Brexit, traders are looking at central banks'
policy decisions."
A big week for central banks kicks off on Thursday with the
European Central Bank meeting, the last one for President Mario
Draghi, while the main focus is on the U.S. Federal Reserve's
policy meeting on Oct. 29-30.
China's yuan CNY=CFXS was a touch firmer at 7.0680 per
dollar after Beijing unexpectedly kept unchanged its new
benchmark lending rate on Monday, for the first time since its
debut in August, suggesting the country is keen to avoid overly
loosening monetary policy. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Sterling falls https://tmsnrt.rs/35RTMtl
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>