The pound has hit its highest level since mid-September as investors hailed Rishi Sunak’s appointment and the dollar fell.
Sterling was up 1.8% on Tuesday to $1.1488 – the highest since Liz Truss’ mini-budget.
Treasury bond costs also fell, reflecting a greater level of investor confidence.
Financial markets have been in turmoil in recent weeks as concerns about the UK economy have been raised.
Rishi Sunak, who became prime minister on Tuesday, has warned the country is facing a “deep economic crisis” with “difficult choices”.
Experts said the pound’s strength was partly due to a “relief rally” after Mr Sunak’s appointment but also to the dollar’s weakness.
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The US currency fell on Tuesday after data showed slowing growth in US home prices and a fall in consumer confidence.
“It’s largely a dollar story, the dollar is losing ground across the board today,” Jeremy Stretch, head of FX strategy at CIBC, told the BBC.
“But sterling has already had a good day, there is no doubt that there is a relief rally here in what appears to be stability in the macro picture after Sunak has come in.”
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