The pound hit a fresh five-month peak above USD 1.30 Monday on renewed Brexit optimism after Prime Minister Boris Johnson requested another extension to Britain's scheduled departure from the European Union.
At about 1230 GMT, the pound reached the highest level since May at USD 1.3013.
It later stood at USD 1.2993, up from USD 1.2984 late in New York on Friday. The euro was down at 85.92 pence.
"Markets (are) starting to price in a best-case scenario in terms of the deal getting passed this week and then a short extension to pass any necessary legislation," CMC Markets analyst Michael Hewson told AFP.
"Whether that optimism turns out to be premature is another matter; only time will tell." Johnson was Monday attempting again to push his EU divorce deal through parliament and avoid the political damage of delaying Brexit beyond next week.
Lawmakers on Saturday mandated the prime minister to break his promise and send a letter to Brussels asking for more time.
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"The main driver (for the pound) is hope of a Brexit extension being more likely, which could result in a better exit deal potentially to be negotiated than is currently on offer," said Accendo Markets trader Samuel Springett.
The pound had already struck five-month highs last week on optimism over Johnson's Brexit agreement with Brussels.
The option of extending the three-and-a-half year crisis past the October 31 Brexit deadline is now in the hands of the 27 other EU member states.
Since spiking above USD 1.30 in the morning London session, sterling has wobbled around that level.
Yet the currency is attracting demand as traders buy on the dips, according to Maurice Pomery, who is head of trading firm Strategic Alpha.
"Markets are still trying to get to grips with what is going to happen with Brexit," he said.
"The pound topped out after taking out $1.30 today but UK bonds stalled at Thursday's lows," Pomery told AFP.
"Dealers seem to be watching bonds closely as we have seen decent moves down -- with yields higher -- across the board.
"The market seems to believe a no-deal (Brexit) is now off the table so we may yet see further gains in the pound."
Elsewhere, Asian equity markets mostly rose but there was little major movement in reaction to China's top trade negotiator Liu He saying at the weekend that Beijing and Washington had made "substantial progress" towards wrapping up a partial trade deal announced earlier this month.
The deal offered China a temporary reprieve from tariffs planned for mid-October, while Beijing said it would hike purchases of US agricultural goods.
But it did not roll back any of the duties already imposed on hundreds of billions of dollars in exports to the US, nor address another round of levies due in December.
On Wall Street, the main indices opened higher, with the Dow adding 0.2 per cent in the first minute of trading.
"US stocks are adding to last week's gain in early action, with US-China trade optimism lingering and the markets eyeing this week's ramp-up of" the third quarter earnings season, said analysts at Charles Schwab brokerage.
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