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Sterling weathers vaccine issues, climbs for second day

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Ritvik Carvalho
·3 min read
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* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Ritvik Carvalho

LONDON, April 13 (Reuters) - Sterling rose for a second day against the dollar and the euro on Tuesday, as analysts said Britain's vaccination drive had not been derailed by its curbing of the use of AstraZeneca's COVID-19 vaccine.

The pound lost 1% against the dollar last week as Britain advised alternatives to the Oxford-AstraZeneca vaccine to vaccinate under-30s. Britain has largely depended on the AstraZeneca vaccine so far to immunize more than half of its population.

The country has offered all over-50s a first dose of COVID-19 vaccine as the rollout of Moderna's shot in England began on Tuesday, the government said, adding it was on track to give a shot to all adults by the end of July.

It recouped some of those losses on Monday as England's shops, pubs, gyms and hairdressers re-opened after three months of lockdown and continued to hold up against a broadly stronger dollar on Tuesday.

By 0747 GMT, the pound was 0.1% higher at $1.3759 and 0.25% higher to the euro at 86.50 pence.

"We were not at all surprised to see sterling's rebound yesterday after last week’s correction: the storm that hit the AstraZeneca vaccine has not derailed the UK vaccination plans, leaving prospects of a sharp recovery in the country intact," strategists at ING said in a note to clients.

"Also, GBP/USD appeared meaningfully undervalued at the end of last week. We expect the pound to show relatively good resilience to any USD rally today."

Sterling has been among the best-performing G10 currencies this year, enjoying its best quarter since 2015 against the euro. The pace of Britain's vaccination drive has led analysts to bet on quicker economic rebound from the country's worst contraction in 300 years.

That trend reversed last week, with sterling suffering a net 2.1% weekly loss against the euro - a move which market participants said was amplified by a squeeze of euro-pound short positions.

Speculators' net long position on the pound versus the dollar shrank in the week to April 6, weekly futures data from CFTC showed. The market has been net bullish on the pound since early December 2020, but the latest data put levels of bullishness at their lowest since February.

Britain's economy grew by 0.4% in February from January as companies prepared for the lifting of a third coronavirus lockdown, according to official data. The data also showed a partial recovery in post-Brexit trade with the European Union.

Economists polled by Reuters had expected growth of 0.6%. However, the data also showed that the fall in gross domestic product in January was not as severe as previously estimated, down by 2.2% compared with the initial reading of a 2.9% drop.

(Reporting by Ritvik Carvalho, editing by Larry King)