Sterling at 14-year high vs. dollar

Sterling hit a 14-year high against the dollar on Tuesday, following highs hit against the Japanese yen and euro as investors chased the pound’s yield appeal.

Sterling hit $1.9859 — its highest since late September 1992.

“Interest rate spreads are one of the key drivers on the back of a tighening bias from the (Bank of England’s) Monetary Policy Committee,” Rabobank markets strategist Jeremy Stretch was quoted as saying by Reuters. UK interest rates, currently at level pegging with the U.S. at 5.25 percent, compare with Japan’s 0.25 percent and 3.5 percent in the euro zone.

Data released on Monday that suggested the UK housing market remains strong despite rising interest rates, also provided a boost to sterling. Property website Rightmove reported that the average UK house price rose 0.5 percent on the month in the December 3 to January 13 period. This corresponded to an annual rise of 13 percent, the highest annual growth since October 2004.

Analysts said that the minutes from the Bank of England’s MPC rate setting meeting released on Wednesday could show whether another sterling supportive rate hike is imminent or whether it will signal the end of sterling’s rally.