Sterling rose on Tuesday as data showed UK manufacturing activity grew last month at its fastest pace in 16 years, extending earlier gains made on purchases by Asian sovereigns and talk of buying related to a dividend payout. The Markit/CIPS manufacturing Purchasing Managers' Index (PMI) rose to 58.3 in December, its highest since September 1994. The headline figure was above the consensus forecast of 57.0 and November's downwardly revised reading of 57.5.
By 1430 GMT, the pound was 0.8 percent higher at $1.5612 after rising as far as $1.5646. Gains accelerated as the pair broke solidly above $1.5600, traders said. Sterling got a lift earlier on buying from Asian sovereign accounts, macro funds and on talk of a UK clearer's dividend payment which required it to buy pounds to pay investors, traders said. There was also talk a supranational entity was buying sterling/Swiss franc, which supported the UK unit. The euro hit an intraday low against the pound at 85.62 pence, coming off a seven-week high of 86.45 pence last week.