LONDON, June 18 - Sterling was steady against the dollar on Monday, holding within half-a-cent of Friday's one-week peaks, as comments from a senior British official continued to dampen speculation of Britain's early euro entry. The pound also held firm against the euro, bolstered after Britain's Minister for Europe, Peter Hain, said on Sunday that the government could not "rush headlong" into joining the euro.
Analysts said a string of recent comments by government officials have made markets question whether the recently re-elected Labour government will use its big majority to push for early membership of the euro. This has helped the pound to recoup losses from 15-year lows against the dollar set in the wake of the June 7 election. "Sterling's downtrend had been accelerated by the euro referendum talk," said Ian Stannard, foreign exchange strategist at BNP Paribas in London.
"But market expectations of a quick referendum on the euro are being scaled back and this is helping sterling."
At 0725 GMT, sterling stood around $1.4050 , about half-a-cent below one-week peaks set on Friday. It is almost three percent above 15-year lows around $1.3680 set early last week.
The pound was steady around 61.35 pence per euro , almost one pence above last Wednesday's five-week lows.
Sterling also rose to its highest in almost a month against the yen , helped by changes to Britain's FTSE international stock indices and a gloomy assessment of the Japanese economy in the Bank of Japan's monthly report, traders said.
Changes to the FTSE indices tracked by funds totalling $2 trillion globally take effect on Monday in the final stage of a transition to a free-float weighting called for by international fund managers.
Traders said they were also keeping an eye on merger and acquistion activity after a report in the Sunday Times that British areospace, industrial and medical products company Smiths Group Plce is in talks with U.S. firm Rockwell Collins that may lead to a 7.5 billion pound merger.
Chartists said sterling could struggle to extend its recent gains against the dollar.
"Sterling has faltered just ahead of the $1.4135 resistance. We look for this to contain the market and for sterling to ease back towards $1.4015," said Karen Jones, technical analyst at Commerzbank in London.
"Failure here will provoke a slide back towards $1.3950 and then $1.3870/60. Only a break above $1.4135 would negate the downside and introduce scope for a rally to $1.4225 and then $1.4400/40."