UPDATE 2-Sterling bounces on Brexit hopes, but Tory conference keeps investors wary
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Updates prices)
LONDON, Sept 24 (Reuters) - The pound bounced on Monday, rising above $1.31 after a big selloff the previous session, but investors said upbeat comments from Britain's Brexit minister about a possible deal with the EU would not support the currency for long.
Brexit minister Dominic Raab said he was confident Britain would eventually clinch a deal with the European Union.
But those comments were unlikely to support the currency for long, analysts said, with May's leadership under increasing pressure ahead of her Conservatives' annual conference this week.
"An aggressive stance from the EU... and the subsequent backlash from Theresa May increases the probability that a confrontation builds through the ...conference," Deutsche Bank currency strategist George Saravelos wrote in a note to clients.
The pound fell to as low as $1.3053 and month implied volatility - a measure of expected price swings - jumped to its highest since February, in its biggest daily rise since January.
"Under that assumption, the current levels on the options market still provide good opportunities for hedging against further exchange rate turbulence."
That places further pressure on May though it is unclear what impact the prospect of a second referendum would have on sterling.
"We doubt this option will impact the pound. A lot of dire developments would probably have to take place first before a second referendum happens," said analysts at MUFG.
But investors have been hastily hedging against more weakness in sterling should the negotiations with the EU collapse. (Reporting by Tom Finn; Editing by John Stonestreet and Hugh Lawson)
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