Sterling hit a one-month high against the dollar on Thursday after the Bank of England kept interest rates unchanged, reassuring traders who had braced for the possibility of additional quantitative easing measures. The BoE held its benchmark lending rate at a record low of 0.5 percent for the sixth month running and said it would keep its 175 billion pound asset-buying programme in place.
"There was a minority expectation of either the BoE cutting the rate it pays on commercial bank reserves to negative, or that the majority could have moved behind (BoE Governor Mervyn) King in voting to extend QE," said Adam Cole, global head of currency strategy at RBC Capital Markets in London.
Sterling jumped as high as $1.6665, reversing earlier losses to hit its highest level since August 13. The pound was on track to post its third straight day of gains, and has rallied 1.5 percent against the dollar so far this week. The euro fell to the day's low of 87.31 pence, pulling away from 88.28 pence hit in earlier trade, its highest in roughly a week.