Sterling gained on the dollar and held steady on the euro on Tuesday after weaker than expected British inflation data did little to dampen expectations that British interest rates still have room to rise.
Sterling was largely following a bigger battle being played out between the dollar and the yen on Tuesday after a Japanese newspaper reported Japanese yen selling intervention may abate at the end of this month.
Although Japanese authorities insisted their currency policy was unchanged, the dollar was trading one percent down on the day at its lowest levels for two weeks against the yen, a move that weighed it down across the board.
"It's such a big move in dollar/yen it's dictating action on all the majors," said Adam Cole, senior currency strategist at Credit Agricole Indosuez in London.
By 1520 GMT the pound had gained 0.5 percent on the day to $1.8163, above a 1-1/2 month low of $1.7901 set last week but 10 cents below an 11-year high in mid-February.
On a trade weighted basis the pound was higher at 104.1 having dipped to a one-month low of 103.30 last week. It was unchanged on the day against the euro 67.91 pence per euro.
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