Sterling holds near 3-month high despite Scottish referendum talk

Sterling edged down on Friday but remains near a three-month high, brushing off fresh talk of a Scottish independence referendum that could wrench apart the United Kingdom after Brexit. Weakness in the U.S. dollar amid thin trading due to the Thanksgiving holiday bolstered sterling, which has approached its September high of $1.34 recently on optimism over Brexit talks between Britain and the European Union.

Sterling edged down on Friday but remains near a three-month high, brushing off fresh talk of a Scottish independence referendum that could wrench apart the United Kingdom after Brexit.

Weakness in the U.S. dollar amid thin trading due to the Thanksgiving holiday bolstered sterling, which has approached its September high of $1.34 recently on optimism over Brexit talks between Britain and the European Union. Scottish leader Nicola Sturgeon said the independence vote should take place in the earlier part of the devolved parliament's next term, which begins next year.

Scots voted 55-45% against independence in a 2014 referendum but both Brexit and the British government's handling of the COVID-19 crisis have boosted support for independence among Scots. With five weeks left of a transition period before Britain leaves the EU, markets anticipate a deal can be struck even though stumbling blocks remain.

Both sides are calling on the other to compromise over fishing, state aid and how to resolve any future disputes. Analysts cautioned that the pound could be in for a bumpy ride in the months ahead despite its current strength, as the twin threats of Brexit and the Scottish vote crystallise.

"Deal or no deal, there’s sure to be chaos early next year. If that encourages people to vote to leave the UK it would be a double blow to the currency," said Marshall Gittler, Head of Investment Research at BDSwiss Group in a research note. The pound nudged down 0.26% against the dollar to $1.3325 on Friday morning, and likewise slipped against the euro to 89.465 pence.

(Reporting By Lawrence White; editing by Philippa Fletcher and Emelia Sithole-Matarise)