Sterling rises against dollar

Sterling hit its highest against the dollar in over a week on Thursday, after weaker-than-expected US economic data cast doubt on prospects of a Federal Reserve interest rate hike this year. US housing starts rose far less than expected in March and permits recorded their biggest drop since last May, which could raise concerns about the US economy's ability to bounce back from a soft patch hit in the first quarter.
Separate data showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week.
By 1415 GMT, sterling was up 0.3 percent at $1.4886 as the dollar fell across the board, having fallen to a five-year trough of $1.4567 at the start of the week. Against the euro, the greenback was 0.2 percent lower, having yo-yoed by up to 5 cents this week.
"Euro/dollar is a bit all over the place at the moment, and therefore it's having a consequence on many of the crosses," said Jane Foley, senior FX strategist at Rabobank in London.
"If we did get stronger data, the dollar would react again. It's certainly very volatile."
Foley added that though political risk ahead of a highly uncertain British parliamentary election on May 7 was having a negative effect on sterling, most of its recent move lower had been the result of dollar strength.
Against the euro, sterling was 0.2 percent higher at 71.84 pence. The pound had earlier hit a four-week high against the single currency on worries over the possibility of a Greek exit from the euro zone and after Wednesday's dovish tone from the European Central Bank.
Greece's finance ministry denied on Thursday afternoon a Financial Times report that the country had approached the International Monetary Fund to request a delay in loan repayments.
"Concerns about an accidental Greek exit are gathering momentum. We are seeing an element of safe-haven flows, with German Bunds yields falling and Greek yields rising," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
"That will cap any bounce in the euro and although political risks surround the pound, euro/sterling, we think, will head lower."
British 10-year government bond yields rose to a three-day high of 1.615 percent, after weak demand at a sale of 1.25 billion pounds ($1.86 billion) of 2040 index-linked gilts.
The auction saw the lowest demand at any sale of index-linked bonds since October 2011, and helped push the spread in yields between 10-year gilts and Bunds to a one-month high of 151.9 basis points.