Sterling rose on Friday, recovering from a one-week low versus the dollar when rising share prices stoked some demand for currencies seen to be higher risk. Friday's gains put the pound on track to end the week in positive territory, recuperating from losses versus the dollar and the euro incurred after weak UK retail sales data on Thursday dampened expectations of economic recovery.
"People are putting some risk back on ... we are seeing quite a good performance from the riskier trades," said Maurice Pomery, managing director at Strategic Alpha in London. Trade in sterling has been volatile this week as investors reassess optimism that the economy may soon recover, a view that was fuelled last week by a batch of firm economic readings.
Figures this week have been mixed, while UK Finance Minister Alistair Darling and Bank of England Governor Mervyn King have both expressed caution about improvements to the economy. By 1344 GMT, sterling traded 0.7 percent higher at $1.6445 as UK share prices rose nearly 2 percent. It fell on Thursday to $1.6187, its weakest in just over a week, after news of the surprise fall in retail sales. The euro fell roughly half a percent to the day's low of 84.55 pence, according to Reuters data, edging closer to the year's low of 84.19 pence touched earlier in the week.