Sterling rose against a broadly retreating dollar on Friday, as the US currency slid in league with the yen after a $20 billion US government aid package for Bank of America dampened extreme risk aversion. The pound also gained traction against the euro as British shares snapped a seven-day losing streak in the wake of the BoA package and news that new British government measures to boost bank lending could come as early as next week.
"There was a positive response to the bailout packages overnight, causing the dollar and yen to lose ground. Sterling is proving to be pretty resilient today bouncing on the international moves," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
"It remains to be seen whether it can hold the gains next week given that we've got BoE minutes and the first assessment of Q4 GDP," she said. The GDP data, due on Friday, is expected to show Britain's growth contracted by 1.2 percent in the last quarter of 2008, placing the country officially into recession.
By 1455 GMT, sterling was up 1.8 percent on the day at $1.4929 having earlier pushed to a session high of $1.4980, while the euro fell 0.9 percent to 88.94 pence, off a low of 88.46 pence that approached recent 4-week troughs. In a reflection of easing risk appetite, sterling spiked 2.7 percent to 135.01 yen, as British stocks rallied 1.9 percent.
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