Sterling hits 2-week high against broadly weaker dollar

LONDON: Sterling hit a two-week high against a dollar weakened by worries about the U.S. presidential election on Wednesday, as investors waited for construction sector data for the latest clues on the health of the British economy.

The battered pound has recovered almost 1 percent this week , boosted by the news that Bank of England Governor Mark Carney would extend his tenure until 2019.

Carney's decision eased concerns about perceived attacks on the Bank's independence in an uncertain political environment, in which worries over a "hard" UK exit from Europe's single market have sent sterling tumbling.

The currency built on its gains on Wednesday, climbing as much as a third of a percent to $1.2285, its highest since Oct. 20, against a dollar that was lower across the board on concerns that Donald Trump could win the U.S. presidential election.

"That is more about the slight weakness in the dollar than any great strength in sterling," said Richard Wiltshire, chief FX broker at ETX capital.

"Brexit is the primary driving force at the moment. Any rallies in sterling are capped by the fear of the unknown."

Investors are looking to Thursday's BoE policy decision and quarterly inflation report. Sterling's fall - almost 20 percent since the vote for Brexit - is expected to push the BoE to raise its inflation forecasts to show a bigger overshoot of its price target than at any time since it gained independence in 1997.

Focus was also on the latest purchasing managers' index (PMI) survey for the construction sector, due at 0930 GMT, though the impact of political jitters on the pound has mostly overshadowed economic data in recent months.

The currency didn't react much to the PMI survey for the manufacturing sector on Tuesday, which showed the highest level of activity in more than two years.

Against the euro, the pound was steady at 90.37 pence.

"The scale of pound depreciation has over-extended and the longer we stabilise around current levels, the greater the risk becomes that we will see a liquidation of short sterling speculative positions and a recovery of the pound against both the dollar and the euro," wrote Bank of Tokyo-Mitsubishi UFJ's head of global markets strategy, Derek Halpenny.