LCU:Sterling edges up vs dollar as Ukraine fears ease
LONDON, March 4 (Reuters) - Sterling edged up against the dollar on Tuesday, struggling to break the levels around $1.67 where it has been stuck for several days, despite some easing of market tensions over Ukraine.
Global investors had looked to safe havens like the dollar after Russian President Vladimir Putin declared this weekend that he had the right to invade Ukraine to protect Russian interests. But in an apparent effort on Tuesday to ease East-West tension, Putin ordered troops involved in a military exercise in western Russia back base.
"It is a signal that (Putin) might not escalate it to other parts of the Ukraine," said Alvin Tan, a currency strategist at Societe Generale. "If the Ukraine situation continues to simmer down and risk sentiment continues to grow from here, we could in fact get a bit of dollar retreat, and that will definitely lift cable (the sterling-dollar exchange rate) to some extent."
Sterling was up 0.2 percent against the dollar at $1.6694 , recovering some of Monday's losses, when it weakened by 0.5 percent. The euro was up 0.04 percent against sterling at 82.43 pence.
There was little market reaction to the one piece of major UK economic data on Tuesday, which showed the strong pace of growth in Britain's construction sector eased off in February as heavy rain and floods curtailed house-building.
"It's slightly weaker than expected, but it's still extraordinarily strong in a historical context, so I think the market is probably just looking through it," said Adam Cole, head of G10 FX strategy at RBC Capital.
Positive economic data in recent months, coupled with expectations of inflows from a sale of U.S. assets by Vodafone , have helped the pound strengthen by almost 10 percent against the dollar since July.
However, sterling has traded between $1.6583 and $1.6769 for the past two weeks, and Societe Generale's Tan believes the pound is running out of support. He estimates sterling could hit a ceiling between $1.69 and $1.70.
"That's actually the upper band of the sterling range since 2009, so technically it's pretty strong resistance," Tan said. (Editing by Larry King)
