LONDON (AFX) - Sterling weakened slightly against the dollar and the euro in volatile midday trade on uncertainty over UK's entry into the single currency, dealers said.
They noted that reports in the weekend press suggesting that the government's attitude was turning against early euro entry had underpinned sterling earlier.
"The main action is still in sterling, which has retraced some of last week's losses following the press comment," said Simon Healey, currency strategist at IDEAglobal.com.
He said the appointment of Jack Straw as foreign secretary, combined with official comments in the weekend press that the government is not going to act "hastily" in taking Britain to euro, have had a positive effect on sterling.
Kamal Sharma, currency analyst at Commerzbank, echoed Healey's view and added that the sell-off in sterling last week was "overdone". "The prospect of the UK entering the euro is probably still some time off," he said.
Both Sharma and Healey said UK producer price figures, out earlier today and broadly in line with market expectations, have had little impact on sterling.
The euro meanwhile was higher after a survey conducted by leading European research institutes, suggesting a below 2 pct growth rate in the euro zone this year, failed to impact the market.
"We have revised down our euroland growth forecast to 2.3 pct largely on the back of continued weakness in the German economy. I think it's likely to go down even more so that we get a figure of some 2 pct," Sharma said.
"But those news have been largely brushed aside in the market," he added.
The yen continued its fall against other major currencies following a sharper-than-expected fall in Japan's first quarter gross domestic product figures.