By Karen Brettell
NEW YORK (Reuters) - Sterling rose by more than 1 percent against the U.S. dollar on Friday as traders evaluated whether the killing of pro-EU British Member of Parliament Jo Cox may alter the balance of opinion in Britain's referendum on European Union membership.
Cox was shot dead on Thursday, leading to the suspension of referendum campaigning.
Cox's death increased speculation that Prime Minister David Cameron might push back the vote scheduled for June 23, or that it could boost the pro-EU "Remain" campaign, which in recent days had fallen behind the "Leave" camp in opinion polls.
"This is people adjusting positions because they don't know what's going to happen," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. "People are unwinding the 'risk off' trades for the most part."
The pound tumbled earlier this week on concerns Britain would send a shockwave through global financial markets and European politics by voting to leave the 28-country bloc.
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The pound was last up 1.06 percent against the dollar at $1.4350, up from Thursday's lows of $1.4010. It rose as high as $1.4387 on Friday, its highest in a week.
The yen held near its highest against the dollar in almost two years and the strongest against the euro in more than three years on Friday, after the Bank of Japan on Thursday held off from further easing monetary policy.
The yen has gained as investors see the Bank of Japan as running out of options to stimulate Japan's economy.
"What you are seeing is the market sort of testing the Bank of Japan, saying that we didn't expect much and you delivered absolutely nothing," said Steven Englander, global head of foreign exchange strategy at Citigroup in New York. "It's a view of a central bank that just doesn't have any effective tools to set a floor for its currency."
The dollar last stood at 104.20 yen , after strengthening to 103.58 on Thursday.
Another focus for the market next week will be a ruling by Germany's Constitutional Court on June 21 on the emergency bond-buying plan devised by the European Central Bank during the financial crisis, which has the potential to upset the ECB's current money-printing programme.
Federal Reserve Chair Janet Yellen will also appear before lawmakers in the U.S. House of Representatives on Wednesday to discuss monetary policy and the state of the economy.
(Editing by Bernadette Baum and James Dalgleish)