Sterling rose towards a one-month high against the dollar on Wednesday as steady buying from Asian sovereign accounts helped to offset the impact from data which showed Britain's trade deficit widening to record levels. Britain's trade gap widened to 8.736 billion pounds in November from an upwardly revised 8.591 billion pounds in October.
Imports of oil and aircraft pushed the trade deficit to its biggest since monthly records began in January 1980, contrasting with expectations for a modest narrowing. The data drove sterling lower against the dollar, before it regained ground to trade at $1.5652, up 0.24 percent for the day. It hit a one-month high of $1.5681-its highest since December 15 - just before the trade data was released. Traders said buying in the pound/yen cross also supported sterling.
The euro edged up against the pound to 83.26 pence, drawing support from a robust response to bond auctions from Portugal. But investors are bearish about the pair with the single currency likely to come under more pressure, as concerns about eurozone peripheral debt problems mount and drive many to unwind long positions in the euro/pound pair.
The euro had fallen to a four-month low of 82.85 pence on January10 with some expecting the pair to test 82 pence in the near term. While investors were grappling with sovereign debt worries in the eurozone - which are likely to force the European Central Bank to keep interest rates low.
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