Image copyright Press Assocation Image caption The EU referendum vote has caused increased market volatility

The pound has jumped the most against the dollar in seven years, as traders reassessed the likelihood of the UK leaving the European Union.

The pound hit $1.4693, a rise of more than three cents, or 2.34%, the biggest one-day gain since March 2009.

The bounce followed several polls over the weekend that suggested a very tight race, but that the Leave campaign may have lost a little momentum.

The FTSE 100 also rose, with shares closing 3% higher on Monday.

That is the biggest one-day gain since February.

Betfair, a firm that has taken in tens of millions of pounds in referendum-related bets, says the likelihood of a remain vote has risen from 65% on Friday to 72% on Monday.

"The pause in the campaign seems to have lent crucial support to team Remain," said Kathleen Brooks, research director at Gain Capital.

"The markets have always been more comfortable with the UK remaining in the European Union."

The pound had fallen sharply over the course of last week, after polls appeared to indicate the Leave campaign was taking the lead.

But figures from the Commodity Futures Trading Commission, a US markets regulator, suggested a broader change in trading sentiment by Friday.

That data indicated that by the end of last week, currency speculators had began to back the pound again by reducing their bets against the currency.

That contrasted strongly to the first week of June, during which time traders' bets against the pound had risen to the highest level in three years.

However, analysts say there is likely to be more volatility this week.

"Following the large sterling moves over last two days and limited risk premium priced in at this point, sterling now looks more vulnerable to negative surprise from the polls," ING strategist Petr Krpata said in a research note.

Image copyright Press Association Image caption Currency traders have reversed bets against sterling that were the biggest in three years

Brexit exposure

Monday's shift in sentiment has boosted shares in banks and builders, which are seen as more vulnerable to damage if the UK votes to leave the EU.

Shares in Royal Bank of Scotland and Lloyds Banking Group both rose more than 7%, while Barclays gained more than 6%.

Barratt and Taylor Wimpey, two of the UK's largest house builders, also saw their shares jump by nearly 7%.

Oil prices rose as well on Monday, with Brent crude trading up more than 2%, and currently hovering around the $50 a barrel mark, at $50.39.