The British currency fell back from its comfortable zone in almost two quarters against the US greenback late Wednesday, erasing some of the advances triggered by signals that Britain is nearing a consensus to abandon the European Union.
Throughout the Asian sector, market attention is back on US-China relations with the yuan also falling back after Beijing rebuked a new US bill that takes a tough position on the events taking shape in Hong Kong.
Traders are still anticipating the results of last-ditch negotiations on global currency markets which lasted late Tuesday night to see if Britain and the EU can negotiate a Brexit deal before the summit.
News that both sides are pursuing a deal strengthened the sterling overnight, while traders said the pound might swing wildly because it is still uncertain if Britain could prevent postponing its withdrawal after October 31.
"Even if both sides can agree on something, it's unknown whether they can adhere to the exit date," said Yukio Ishizuki, Tokyo's Daiwa Securities foreign exchange strategist.
Tuesday's pound soared after Bloomberg News reported negotiators expected to reach an agreement in Europe by midnight on Tuesday, but a lack of news in Asia about the results of the talks helped push the currency down, traders said.
Without a Brexit agreement, the EU's Single Market policy would be exposed to customs duties and checks for health, which would cause economic uncertainty.
On the onshore sector, the yuan fell to 7,0977 per dollar by about 0.23 percent. The yuan was down more than 0.3 percent to 7,0912 versus the dollar on the offshore exchange.
Initial leaks of a "Step 1" trade deal between the US and China last week briefly excited investors, but any excitement has since been curbed by the lack of details around the negotiation.
The yuan fell 108.70 versus the greenback, dragged down from its recent previous peaks. In contrast to the pound and the Australian dollar, the yen increased by about 0.39 percent. The dollar index against a six-currency basket rose slightly to 98,322 to 0.03 percent.
The regular fixing of the yuan, which kept its strong balance in the last few weeks, can finally begin keeping tabs on its spot rate. The Chinese central bank, on the other hand, trimmed down its regular CNY reference price to $7,0745, gauging spot market losses.
The fixings came as finance ministers have effectively held the regular reference price firm for 15 sessions ahead of the next round of trade talks with Washington.
