Sterling rallied to a four-month high against a broadly weaker dollar on Tuesday but lost steam in late trade after a key measure of UK unemployment showed a bigger-than-expected rise in the jobless rate in March. Still, the latest batch of economic reports underpinned hopes the UK recession may be finding a bottom, helping the pound come close to setting a fresh 2009 high against the US dollar.
Industrial output fell less than expected in March, retail sales rose at their fastest rate in 3 years in April and house prices in England and Wales fell at their slowest pace in 15 months in the 3 months to April, reports on Tuesday showed. "That led to the setback we're seeing," said Antje Praefcke, currency strategist at Commerzbank.
Views the global recession may be bottoming have boosted stocks, oil and higher-yielding currencies such as the Aussie dollar, to the detriment of the greenback, which plumbed a four-month low versus a basket of major currencies. The pound rose more than 1 percent to a high of $1.5354 - a level last seen on January 8 - before retreating to $1.5254 by 1448 GMT, up 0.9 percent on the day.
It came within easy reach of the year's high at around $1.5374 set on January 8. Against a currency basket of Britain's major trading partners, sterling's trade-weighted index gained 0.9 percent to 79.1. The pound rose 0.3 percent on the day to 147.49 yen and firmed against the euro, which slipped 0.4 percent to 89.45 pence.