Sterling rose against the dollar but lagged the euro on Wednesday as reports the International Monetary Fund was proposing to boost its lending resources supported the euro and riskier currencies. Bloomberg News reported that the IMF was planning a large expansion in its lending pool to safeguard the global economy against the worsening euro zone debt crisis. Reuters later reported the IMF estimates it needs to raise up to $600 billion in new resources.
Tracking gains in the euro against the dollar, sterling was up 0.4 percent at $1.5405, having hit a one-week high of $1.5439. Traders said the pound extended its rise after breaking above last week's high of $1.5410, where stop loss orders were placed, and added that options expiries at $1.5400 may influence trade.
"There have been signs of stabilisation in the European banking sector and now there is talk of the IMF stepping in to stabilise sovereigns, which is seen as good news and is benefiting sterling against the dollar," said Kathleen Brooks, research director at FOREX.com.
The euro was also boosted as an analyst at Fitch said the ratings agency did not expect Italy to default. It rose 0.15 percent versus sterling to 83.20 pence though it stayed shy of a high hit on Friday of 83.76 pence. The shared currency hit a high for the day of 83.54 pence but analysts said it may struggle to extend gains. Sterling barely reacted to data that showed the number of Britons seeking unemployment benefits rose much less than expected in December.
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