SYDNEY, Feb 26 — The pound climbed to near four-week highs today on a report UK Prime Minister Theresa May could seek to delay a Brexit deadline while Asian shares paused at a five-month peak on signs Washington and Beijing were making progress on a trade deal.

Sterling jumped to US$1.3149 in early Asian trade after Bloomberg reported May was expected to allow her Cabinet to discuss extending the Brexit deadline beyond March 29 at a crunch meeting later in the day.

The news was a relief to investors who had feared a no-deal Brexit, although dark clouds are still looming for the currency.

"News that Prime Minister May is considering the option of postponing Brexit given all the turmoil in parliament can hardly come as a big surprise,” said Nick Twidale, analyst at Rakuten Securities Australia.

"However...details are few and far between. The market will seek further clarity over the coming sessions and if it is not forthcoming, sterling traders can expect more swings in the currency.”

A delay might also anger May’s pro-Brexit colleagues who could even support a vote of no confidence in the government, potentially triggering a general election.

Elsewhere, MSCI’s broadest index of Asia-Pacific shares outside Japan held near its highest since mid-September as US and Chinese negotiators work to hammer out a deal that would end a tit-for-tat tariff battle that began in mid-2018.

U.S. President Donald Trump said on Sunday he would delay a tariff hike on US$200 billion (RM813.6 billion) of Chinese imports in the clearest signs yet that both sides were making progress in the talks, but he also sounded a note of caution, saying a deal "could happen fairly soon, or it might not happen at all.”

A spokeswoman for the US Trade Representative’s Office said the agency had no announcements at this time beyond the president’s remarks.

"There were caveats on the proposed trade deal,” Rakuten’s Twidale added. "Although largely ignored by the market yesterday, they suggest that the path forward will not be a straight one and investors will do well to prepare for more volatility.

Yesterday’s losses in the MSCI Asia-Pacific index was led by Australian shares which slipped 0.7 per cent, weighed by energy stocks as oil prices tumbled overnight. South Korea’s KOSPI was flat while Japan’s Nikkei rose 0.2 per cent.

Wall Street’s three major indexes ended higher yesterday but well below the session’s highs, with the Dow up 0.2 per cent, the S&P 500 adding 0.1 per cent and the Nasdaq gaining 0.4 per cent.

Investors were also wary of weakening estimates for current quarter earnings, with Wall Street yesterday expecting a 0.9 per cent decline in S&P first-quarter earnings per share compared with expectations for 5.3 per cent growth on Jan 1, according to IBES data from Refinitiv.

The trade news was largely priced in to currency markets, with the risk-on mood nudging the dollar to 111.23 against the safe haven Japanese yen, a level not seen since late December. The greenback was last at 111.06.

The dollar index was flat at 96.413 against a basket of currencies.

Focus now shifts to an appearance by US Federal Reserve Chairman Jerome Powell before a US Senate committee today.

"The market will be looking for signs the Fed remains comfortable with the current state of policy,” said Steven Dooley, currency strategist at Western Union Business Solutions. "The markets will also want to hear details about the eventual end of the Fed’s balance sheet reduction programme.”

The euro idled at US$1.1359, staying within the US$1.1213/1.1570 range that it has held since mid-October.

In commodities, oil prices took a knock yesterday to post their largest daily percentage drop this year after Trump called on OPEC to ease its efforts to boost crude prices, which he said were "getting too high.”

US crude was last up two cents at US$55.5 a barrel in early Asian trading while Brent finished 3.5 per cent lower yesterday at US$64.76. — Reuters