TOKYO- The British pound rose against the dollar and euro on hopes that Britain and the European Union will secure a free trade agreement after their decision to extend negotiations beyond the Sunday deadline.
The dollar traded near a 2 1/2-year low against major peers ahead of a US Federal Reserve meeting ending Wednesday where policymakers are expected to increase purchases of longer-dated Treasuries to contain a rise in yields.
The rally in sterling may not last, some analysts warn, because Britain and the EU have repeatedly struggled to narrow their differences and there is still a risk that trade and business will be thrown into chaos without an agreement.
“This is a temporary move higher in the pound, but it is still not clear that a no-deal scenario can be avoided,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“A partial deal with an agreement to negotiate further next year might save the pound, but anything less would lead to renewed selling. I would not buy sterling from here.”