LONDON: Sterling fell on Friday, hitting a 14-month low against the dollar, and on track for a fourth straight week of losses as investors unwound bets that the Bank of England would raise interest rates any time soon.
The gap between the interest-rate sensitive two-year UK gilt yield and the US counterpart has narrowed to its lowest since October 2013, making the pound less attractive to investors.
The gap has narrowed after the Bank of England said on Wednesday that inflation was likely to fall further, pushing back bets on the first post-crisis interest rate hike to the end of 2015 with some now pricing in a move in the first quarter of 2016.
That raises the prospect that the UK will be beaten as the first major central bank to raise interest rates since the financial crisis - a title it was widely expected to win until the summer.
The US Federal Reserve is expected to raise rates in the middle of 2015.
The pound fell to $1.5655 in Asian trade, its weakest since September last year.
It was last trading at $1.5680, down 0.2 percent on the day.
"Sterling continues to trade very poorly indeed and there doesn't seem much good support for the pound against the dollar until the very distant $1.5350 area," said Chris Turner, head of currency strategy at ING.
Against the euro, it was trading near a four-week low of 79.55 pence per euro, despite euro zone growth data doing little to alter expectations that the European Central Bank will have to resort to quantitative easing in the coming months.
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