Sterling rose against a broadly weaker dollar on Wednesday as investors pared back long positions in the US currency, offsetting the negative impact of rising UK unemployment and persistent concerns over an ailing British economy. The pound was last trading up 1.2 percent on the day at $1.5783, its highest level in nearly four weeks. Traders said stop-losses had been hit on the break of the late September high at $1.5716.
The dollar index, meanwhile, fell as much as 1 percent on the day to a three-week low, as exposures to the US currency were scaled back. Sterling was well above a 14-month low of $1.5270 plumbed last week after the Bank of England announced it would restart its asset purchase programme to try to stimulate demand in the UK economy.
Analysts said the subsequent recovery had been fuelled by a squeeze of excessively short positions in the pound. Data showing the number of unemployed in Britain at its highest since 1994 added to concerns over the weak economy, though the currency impact was limited.
Technical analysts said the break of $1.5716 had triggered a double-bottom reversal pattern which would target a potential move towards $1.6160. The euro was close to flat for the day at 87.50 pence, with offers reported into the recent highs at 87.95. Technical analysts said Tuesday's close above the 200-day moving average at 87.16 was a positive signal.
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