* Dollar/yen hits one-month high
* Strong UK manufacturing PMI boosts sterling
* Aussie up after better-than-expected Chinese data (Recasts, releads with sterling, adds details)
By Anirban Nag
LONDON, Sept 1 (Reuters) - Sterling jumped 1 percent against the dollar and hit a one-month high against the euro on Thursday after data showing the British manufacturing sector staged one of its sharpest rebounds on record in August.
The Markit/CIPS Purchasing Managers’ Index (PMI), a closely watched gauge of factory activity, jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July after Britain’s June 23 vote to leave the European Union.
August’s headline rise matched the biggest month-on-month increase in the survey’s nearly 25-year history, Markit said.
That saw the pound grab centre stage. Sterling rose 1 percent to $1.3267, from $1.3152 beforehand while the euro fell to 84.125 pence per euro, down from 84.68 pence before the survey was released.
“The pound is flying after the UK manufacturing PMI for August blew away market expectations,” said Craig Erlam, senior market analyst at OANDA. “Not only did the market not expect such a jump, it was barely expecting any improvement at all, just a slight recovery from the knee jerk response in July.”
Sterling has performed reasonably well in the past few weeks, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following the shock Brexit vote in June.
The dollar extended its advance against the yen and the euro with some investors positioning for Friday’s non-farm jobs report, which is set to shape the market’s near-term U.S. interest rate expectations.
Against the yen, the dollar was up 0.2 percent at 103.66 yen , its highest in a month. The euro was down 0.1 percent at $1.1148. Nevertheless, traders were sceptical about the driving the dollar much higher before the jobs report.
“There are still some sceptics who are still not convinced that the Fed will take action (on rates) again this year,” said Antje Praefcke, currency strategist at Commerzbank. “They have been misled by the Fed one too many times over the past few months in their hope for a rapid rate hike cycle following the lift-off.”
Praefcke said those investors would have to rethink their positions and buy the dollar if the U.S. labour market report was stronger than forecast.
The dollar made significant gains following comments from Federal Reserve Chair Janet Yellen last Friday at a central bankers’ gathering in Jackson Hole that revived near-term rate hike prospects.
The Australian dollar rose after PMI data showed activity in China’s manufacturing sector picked up unexpectedly in August, albeit modestly.
The Aussie, often used as a proxy for China-related trades, edged up 0.2 percent to $0.7538 after plumbing a one-month trough of $.07490 on Wednesday. (Editing by Catherine Evans)