Sterling strengthened against the dollar on Thursday as part of the greenback's broad decline after the Federal Reserve's policy statement the previous day, but slipped against an even more buoyant euro.
The dollar fell broadly after the Fed left US interest rates on hold at 5.25 percent, as expected, but issued a statement that contained slightly less stringent warnings on inflation than some in the market had expected.
Sterling benefited as a result, with US-UK spreads narrowing in the pound's favour. But the euro was an even bigger gainer on international currency markets, and UK-euro zone spreads shifted in favour of the euro. Sterling took a back seat on Thursday to the dollar and euro, shrugging of comments from Chancellor Gordon Brown on growth and public sector pay deals.
But the pound's general positive tone helped lift it to a new eight-year high against the low-yielding yen. Against the yen at least, more gains for the pound are on the cards. The pound was at $1.8837, up 0.3 percent from late New York levels the previous day, while the euro was up 0.1 percent against sterling at 67.19 pence. Sterling was also trading up at 223.90 yen, having hit a new 8-year peak of 224.08 yen, according to Reuters data.
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