Sterling hit a seven-month high against a broadly weaker dollar on Tuesday as surprisingly strong figures on the US housing market fuelled speculation the global economic downturn may be easing. Pending sales of US homes rose a monthly 6.7 percent in April, data showed on Tuesday, eclipsing forecasts for a 0.5 percent rise and posting their biggest monthly gain in 7-1/2 years.
The figures added to hopes that the nation's housing market may be on the mend following the subprime crisis, boosting share prices and triggering broad selling in the dollar, which has suffered as investors' appetite for riskier assets increased.
The pound also brushed off a fall in UK shares on news that an Abu Dhabi government-owned firm had sold its shares in one of Britain's largest banks. Higher-than-expected British mortgage approvals had a limited impact on the UK currency.
The pound rose as far as $1.6579, its highest since late October. Gains against the US currency helped to push the pound up to 83.1 on a trade-weighted index of major currencies, its highest level of the year. "The rise in sterling is pretty much the result of continued, broad-based weakness in the dollar," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services.
Media reports that UK Home Secretary Jacqui Smith plans to resign her government post had little initial impact on sterling. Analysts say that barring early national elections, sterling is likely to show limited reaction to political turbulence in the UK.By 1514 GMT, sterling traded at $1.6567, up 0.7 percent on the day. The currency has already gained more than 2 percent this month, after rallying nearly 10 percent in May. It was still close to a six-month high around 86.00 pence to the euro hit the previous day, but the single currency gained 0.3 percent to 86.35 pence on the day.
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