Sterling hit a two-year high against a weakened dollar on Monday and held steady against the euro, shrugging off upbeat British housing data. The dollar has been under pressure since late last week as speculation that central banks might diversify their reserves away from dollars and concerns the US economy may be slowing down triggered stop-loss orders in thin trade.
"We are seeing a large dollar correction (lower)," Adrian Hughes, currency strategist at Societe Generale, said. The pound rose as high as $1.9465, its highest since December 2004, before paring gains to $1.9386 by 1524 GMT. Sterling is one of the best performing currencies against the dollar this year, rising more than 12 percent since January.
It was trading at 66.90 pence per euro, in the middle of recent ranges. It hit a two-month low of 67.94 earlier this month. On the trade-weighted index, the pound was steady on the day at 103.30, having hit a 2-1/2 year high of 103.90 earlier in November.
Monday's data on the housing market reinforced signs that rising interest rates have not yet dented demand and speculation the Bank of England might tighten monetary policy again.
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