Sterling drops on Scottish uncertainty; euro steady against dollar

Sterling dived to its lowest against the dollar in nearly 10 months on Monday after a poll for the first time showed Scotland was ready to vote to break up its three-century-old union with the rest of the United Kingdom.

With just 10 days to go before the referendum, a YouGov survey for the Sunday Times newspaper put approval of independence at 51 percent against the "no" camp's 49 percent.

Until a week ago, financial markets and London-based authorities had regarded the risk of Scotland's departure as unlikely.

"The speed with which the polls have flipped has clearly been a shock to a lot of people," said Adam Myers, European head of FX strategy at Credit Agricole in London.

Sterling sank more than 1 percent, its most in 13 months, to trade at $1.6150 against the dollar. It was also almost 1 percent lower against the euro, driving the Bank of England's trade-weighted sterling index to its lowest since the end of April.

The sterling was by far the largest mover on Monday, with little new economic data to move other currencies.

The dollar was steady against the euro and gained against a basket of six major currencies, despite disappointment over Friday's U.S. employment report for August.

Nonfarm payrolls increased 142,000 last month after expanding by 212,000 in July, the Labor Department said on Friday. The jobless rate fell 0.1 percentage point to 6.1 percent, but that was partly because people dropped out of the labor force.

"Although it disappointed expectations, and many details were not positive, the market tended to overlook the number a little bit," said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.

"Other indicators are still showing that the U.S. economy will strengthen in the second half of this year," he said. "The payroll number did not change that."

The dollar index rose 0.25 percent on Monday to 83.825.

The euro was steady. It had come under pressure on Thursday after the European Central Bank cut rates to new lows and launched and asset purchase program to ward off deflation.

Market positioning still indicates a number of investors are short the European currency, which is likely to weigh on it further, said Schwerdtfeger. "It's very hard to find anyone at the moment that is trusting that the euro is going to go higher."

The euro was last at US$1.2945, just off a 14-month low of $1.2918 set on Thursday.

(Editing by Lisa Von Ahn)