* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Britain, EU rushing to agree Brexit terms
* Sterling loses gains in Asia
* Markets still digesting U.S.-China trade disappointment
By Stanley White
TOKYO, Oct 16 (Reuters) - The British pound fell from its
highest level in almost five months versus the U.S. dollar on
Wednesday as investors started to question their optimism about
Britain's negotiations to leave the European Union.
Sterling also pulled back from its highest in five months
against the euro as investors booked profit and prepared for a
make-or-break summit between Britain and the EU on Thursday and
Friday.
The focus is on last-ditch talks that dragged on late into
Tuesday night to see whether the two sides can draft an
agreement on Brexit before the summit.
Reports the pair were getting closer to an agreement boosted
sterling overnight, though traders said sterling could swing
wildly because it is still unclear if Britain can avoid
postponing its departure beyond Oct. 31.
"Even if the two sides can agree something, it is unclear if
they can stick with the exit deadline," said Yukio Ishizuki,
foreign exchange strategist at Daiwa Securities in Tokyo.
"Whether Britain's parliament will approve whatever has been
agreed is another big uncertainty. Sterling had a good run-up,
but some investors are lightening their positions."
The pound GBP=D3 fell 0.20% to $1.2758, pulling back from
a five-month high of $1.2800 reached on Tuesday.
Against the euro EURGBP=D3 , the British currency fell
around 0.23% to 86.51 pence. On Tuesday, sterling hit 86.25
pence per euro, the strongest since May 10.
The pound on Tuesday jumped after Bloomberg News reported
that negotiators hoped an agreement would be reached by midnight
on Tuesday in Europe, but a lack of news in Asia about the
results of the talks helped push the currency lower, traders
said.
Without a Brexit deal, trade from Britain that previously
flowed unhindered across the EU's single market would be subject
to customs tariffs and safety inspections, which many fear would
cause economic turmoil.
The yen JPY=EBS held steady at 108.81 per dollar, within
striking distance of a two-month low.
The Japanese currency initially weakened on Tuesday due to
hopes Britain will avoid a messy no-deal Brexit, but those gains
were countered in Asia on Wednesday by growing disappointment
with U.S. efforts to scale back its trade war with China.
Reports of a "Phase 1" trade deal between the United States
and China last week initially cheered markets but the dearth
of details around the agreement has since curbed any
enthusiasm.
The dollar index .DXY against a basket of six currencies
rose slightly to 0.03% to 98.322.