Page last updated at 22:35 GMT, Tuesday, 4 August 2009 23:35 UK

Pound clears $1.70 against dollar

Pound coin rests on dollar note

The pound has continued to gain against the dollar, rising above $1.70 for the first time since October on optimism about the UK economy.

Sterling forged higher on Monday in the wake of strong UK manufacturing data and hopes about the health of the banking sector.

The pound rose as high as $1.7005 on Tuesday before falling back to $1.6938.

It also hovered near a one-month high against the euro of 84.59 pence that it reached on Monday.

The pound got a lift on Monday after data showed the UK manufacturing sector expanded for the first time in more than a year.

Robust results from banking giants Barclays and HSBC also increased confidence in the currency.

The UK economy is viewed as being particularly reliant on the banking sector so evidence of any upturn benefits sterling.

Analysts at French investment firm Calyon said that there was "growing optimism that the UK economy will be able to shake off the shackles of recession faster than many had thought".

While still a long way below the $2 levels seen in July last year, the pound has rebounded 25% from the 23-year low of $1.35 it hit in January this year.

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