The British pound briefly jumped as much as 0.5% to above $1.28 after the Evening Standard newspaper said Brexit could be delayed.
The London newspaper, which is edited by former UK treasury chief George Osborne, cited UK cabinet ministers as the source of the information.
The pound quickly gave back most of its gains.
The UK is scheduled to leave the EU on March 29, but Prime Minister Theresa May has not yet secured parliamentary support for her divorce agreement, raising the prospect that the country could crash out of the trading bloc without a deal.
Businesses, investors and the Bank of England say that would spell disaster for the British economy and the global companies doing business there.