Sterling erased earlier gains on Wednesday after The Times reported that Britain's Prime Minister Theresa May had rejected an improved offer from the European Union to solve the Irish border issue.
The British currency sank to the day’s low after the report said May will appeal to EU leaders at a summit in Austria to move away from the bloc’s chief Brexit negotiator Michel Barnier’s position.
May is meeting with EU leaders at a summit in Salzburg, Austria.
Sterling slid more than half a cent against the dollar after The Times’ report to a low of $1.3098 before edging slightly higher to trade at $1.3152 at 1520 GMT.
The pound had earlier risen to a nine-week high of $1.3215 as data showed inflation unexpectedly accelerated in August.