Pound edges closer to $2 rate

STERLING powered to fresh 11-year highs above $1.90 today as the ailing dollar continued to be pushed lower across the board on foreign exchanges.

Dealers said sterling's progress towards the magic $2 mark was helped by news that Vodafone had withdrawn from a multi-billion-dollar auction for US firm AT&T Wireless, which had been regarded as a potential trigger for an inflow to the dollar from the pound.

Sterling rose as high as $1.9140, up almost a cent on the day and a level not seen since it was ejected from Europe's exchange rate mechanism more than a decade ago.

The dollar also hit a new record low of 1.2927 against the euro as investors dumped the greenback in search of higher yielding assets.

'Sterling is the flavour of the month now,' said Lee Ferridge, head of global currency strategy at Rabobank. 'The Vodafone news helped. There were some worries about outflows from the UK so this gave sterling another lift higher.'

It is also benefiting from the yield appeal of UK assets, with interest rates in Britain at 4% compared with 1% in the US. American policymakers have so far done little to prop up their currency, hinting instead that rates on the other side of the Atlantic are likely to remain low for some months to come.

Only the Japanese yen failed to capitalise on the dollar's woes, despite news that the world's second-biggest economy grew at the fastest pace in more than 13 years in the final quarter of last year.

Japan's economy expanded by 1.7%, or 7% year-on-year. Dealers suspected Japanese authorities had intervened to stop the yen from rising.