Business

Sterling at six-month dollar high

Sterling has risen further to hit a new six-month high against the dollar, with analysts pointing to both rising confidence in UK economic prospects and worries about the US recovery.

Sterling was up 0.3% at $1.5943 in New York, near a six-month peak of $1.5968 hit earlier in the day.

The UK has seen upbeat manufacturing sector data and robust bank earnings.

But there has been speculation that the US may resort to pumping money into the economy to maintain growth.

This adoption of so-called quantitative easing - already done in the UK - would make the dollar a less attractive currency in which to invest.

Such reports had led to the dollar taking "a pummelling" said Jane Foley, research director at Forex.com.

The dollar fell against several other currencies, including the euro. Meanwhile, sterling was down slightly against the euro at 1.2042 euros.

Earlier this week, figures showed that US economic growth had slowed between April and June. US GDP grew by an annualised rate of 2.4%, compared with an annual rate of 3.7% in the previous quarter.

'Challenging environment'

Strong earnings from HSBC on Monday added to confidence in the UK recovery, analysts said.

And the pound was also helped by a report from the EEF engineering group which said the UK's manufacturing sector had performed better than expected in the first half of the year.

Stronger-than-expected UK growth could create "a supportive dynamic for the pound," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

However, a survey released on Tuesday indicated that activity in the UK construction sector had fallen in July.

The Chartered Institute of Purchasing and Supply said its construction index had dropped to a four-month low of 54.1 in July from 58.4 the previous month.

The survey highlighted that the sector continued to face "a very challenging environment", said Howard Archer, chief UK and European economist at IHS Global Insight.

"This will likely cause the recovery to be gradual overall and bumpy."