The pound climbed to its highest level against the dollar in more than two years on Friday as jitters over Covid an ultra-low interest rates weighed down on the US currency.
Sterling rose more than 1pc against the dollar to above $1.33, briefly touching highs not reached since June 2018 in a major turnaround from the $1.14 hit at the depths of the crisis in March.
It also climbed more than 0.4pc against the euro to €1.12.
The US dollar index fell deep into the red in the aftermath of a speech by US Federal Reserve chairman Jerome Powell at the Jackson Hole Symposium, who gave a clear signal that it will have low rates for longer.
The Fed intends to adopt a policy that will allow inflation to overshoot 2pc in the coming months and years in order to guarantee economic growth.
The greenback was also hurt by a broader rally in the yen after the surprise announcement that Shinzo Abe is set to resign as Japan’s prime minister. The news sent the yen higher due to the Japanese leader’s ties with loose fiscal and monetary policy.
George Vessey, currency Strategist at Western Union, said: “The pound continues to shrug off domestic uncertainties and its correlation with global risk appetite has seen it stretch higher.”
Some analysts have said that renewed weakness in the pound is still a possibility, as a mix of Brexit uncertainty, coronavirus fears and economic gloom could drive it lower if a second wave strikes or unemployment surges.