LONDON, April 26 Sterling rose against the dollar on Wednesday, as traders pared back their holdings of safehaven assets after U.S. banking jitters sparked a rush for safety the day before.

At 1015 GMT, the pound was 0.49 higher against the dollar at 1.2471 .

Despite expectations of the Bank39;s terminal rate falling as financial stability concerns cross the Atlantic, the pound has almost retraced all of yesterday39;s losses as FX traders look to divest out of the dollar today, said Simon Harvey, head of FX analysis at Monex Europe.

The U.S. dollar had moved higher overnight on concerns over the U.S. banking sector and the economy, along with the safehaven yen, but this reversed on Wednesday morning.

I think what we are seeing is just a market flowing out of the dollar and trimming long positioning that was built yesterday, said Monex39;s Harvey.

According to Stuart Cole, chief macro economist at Equiti Capital, the market has taken comfort that the banking crisis will not spread, while positive earnings from some major U.S. tech companies have helped allay concerns that the US economy is in trouble.

The culmination of all this has been some easing in demand for safe haven assets such as the dollar, allowing the likes of sterling to benefit, said Cole.

But I think it is a misleading picture and the market is choosing to look at the current earnings numbers while choosing to ignore the increasing signs that U.S. economic activity does appear to be slowing, said…