Sterling sailed through $2.10 to notch up another 26-year high on Wednesday, as market sentiment deteriorated sharply against the dollar and investors factored in the possibility of further US interest rate cuts.
"This isn't a sterling story. This is a dollar story and momentum is clearly against the dollar," said Paul Robinson, strategist at Barclays Capital.
Sterling joined the euro, Swiss franc and Swedish and Norwegian crowns in hitting multi-year highs against the greenback after comments from Chinese officials re-ignited concerns about central banks switching reserves out of dollars.
Nagging doubts about the health of the US economy also troubles investors. By 1512 GMT, sterling had risen 0.88 percent to $2.1057, having earlier struck $2.1071, according to Reuters data. It was mostly flat against the single currency at 69.73 pence.
The market is now poised for the Bank of England's interest rate decision at the end of its two-day meeting on Thursday, with most economists expecting it to hold at 5.75 percent. "About 30 percent is priced in for a cut so not changing rates will be a slight surprise on the upside, even though most people are expecting no change. So that might be mildly positive for sterling," Robinson said.