Sterling rose to nearly $2 and hit a 15-year high versus the yen on Friday, extending gains made earlier in the week after Bank of England minutes suggested that rates will rise in July, rather than August.
BoE minutes showed that four of the nine Monetary Policy Committee members - including Governor Mervyn King - voted for a rate hike this month. This wrong-footed investors who had expected only two dissenters against the decision to hold rates. Investors, in search of high yields, rushed to buy sterling which already has the highest interest rates among the Group of Seven currencies, at 5.5 percent.
As a result, the pound scaled four-month highs against a trade-weighted basket of currencies this week, and was on track for its biggest one-week percentage gain versus the dollar since January - stopping just four ticks short of the $2 mark. "The BoE (minutes) on Wednesday were the high point so it's no surprise the cable (sterling/dollar) is higher and euro/sterling lower. It does look now like the BoE will hike at the next meeting," said Geoff Kendrick, currency strategist at Westpac.
By 1407 GMT sterling had risen as high as 247.88 yen, hitting a 15-year high for the sixth trading day in a row. With rates of just 0.5 percent the yen is often borrowed to fund purchases of higher-yielding currencies like sterling. Sterling rose as high as $1.9996. On a trade-weighted basis the pound matched the previous day's four-month high at 104.9.
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