The dollar hit a 19-month high against the pound on Thursday ahead of a Bank of England decision on interest rates and crept to an 11-month peak versus the yen as oil prices surged to another record high. Although the Monetary Policy Committee was not expected to alter its key rate later in the day, growing speculation for a cut drove sterling down against the dollar, which has been supported by ongoing US interest rate rises.
"The MPC is coming up today, and there are some expectations that they might lower rates," said Toshiaki Kimura, forex manager at Mitsubishi Trust and Banking.
A Reuters poll of 43 economists this week showed that 39 respondents see the BoE leaving rates at 4.75 percent, after a similar survey of 45 economists last week produced a consensus for steady rates.
Interest rates - specifically, the dollar's increasing rate advantage over its rivals - have become a pet issue of the currency market, overshadowing dollar-negative factors such as the huge US current account and budget deficits.
The European Central Bank also is expected to keep its rates at 2 percent on Thursday, although sluggish economic growth in the euro zone has raised speculation the ECB could trim rates in the medium term.
Widening US rates have helped to attract investors to the dollar in search of higher returns, which has been key to the currency's rise of nearly 10 percent against the yen and 12 percent versus the euro since the start of the year.
The Federal Reserve raised its funds rate last week for the ninth straight time to 3.25 percent.
The sterling had steadied at around $1.7510 after falling to $1.7468, its lowest level since December 2003.
The dollar bought 112.20 yen after it rose to just above 112.30 yen, its highest level since the end of July 2004.
Some traders said the dollar's latest climb against the yen had been driven in part by the euro's gains versus the Japanese currency after oil prices surged above $61 a barrel on Wednesday and touched a record high of $61.63 on Thursday.
The euro was little changed at 133.75 yen after rising nearly 0.6 percent on Wednesday.
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