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Pound Recovers, but Set for Biggest Weekly Drop in 6 Months

Feb 25 (Reuters) - The British pound stabilised on Friday, recovering from a two-month low hit in the previous session after investors rushed into safe-haven currencies like the Japanese yen and the U.S. dollar following Russia's invasion of Ukraine.

Against the dollar , the pound steadied at $1.3376 after falling to $1.3302 on Thursday, a Dec. 22 low. Versus the euro , the pound edged 0.2% higher to 83.52 pence.

Missiles pounded the Ukrainian capital on Friday as Russian forces pressed their advance and Ukrainian President Volodymyr Zelenskiy pleaded with the international community to do more, saying sanctions announced so far were not enough. 

But some semblance of calm was evident in global markets on Friday, with European stocks edging higher and riskier currencies like the Australian dollar strengthening after Thursday's sell-off.

"We interpret the markets’ reaction as an acknowledgment that the Ukraine war is unlikely to spiral into a broader conflict that would pit NATO directly against Russia while the sanctions are unlikely to derail the economic recovery in the U.S. and Europe," RBC strategists said.

But underneath the surface, tensions remain. Though implied volatility on one-week pound options retreated , they remain near their highest levels in since mid-December.

On a weekly basis, the pound is on track for its biggest loss since August 2021.

Reporting by Saikat Chatterjee; Editing by Mark Potter

Source: Reuters

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