The dollar retreated across the board on Thursday and sterling rose the most in nine months on reports that London is close to sealing a financial services deal with Brussels. Currencies hit hard by recent dollar buying soared as safe-haven demand for the greenback receded.
A British official said London was close to agreeing on a deal giving UK-based financial services firms basic access to European Union markets. The British government and EU officials later played down the chance of an imminent deal. The BoE kept interest rates on hold on Thursday but kept its options open and hinted at slightly faster rate rises if Brexit goes smoothly.
BoE Governor Mark Carney said a no deal, no transition Brexit is not the most likely scenario. "For Carney to say that a no-deal situation is 'not the most likely scenario' gives the pound a reprieve," said Juan Perez, senior currency trader with Tempus, Inc. in Washington.
Sterling was 1.46 percent higher on the day. The euro was up 0.79 percent. "I think after six weeks of taking a beatdown over Italy and their politics, now the focus is on us, a country with some issues lately going into a particularly important mid-term election," said Perez.
More broadly, the dollar index, a gauge of its value versus six major peers, fell 0.76 percent to 96.392, a six-day low. The index hit a 16-month high on Wednesday. The index rose 2 percent for the month of October, its best monthly performance since May.
The New Zealand dollar, which slipped 1.5 percent in October, started November on a firm footing and was up 1.93 percent. The Canadian dollar strengthened against its US counterpart on Thursday. China's yuan edged off a 10-year low on Thursday to end at 6.9496 per dollar, its highest onshore close in nearly a week.
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