The pound climbed to its strongest level against the U.S. dollar in more than two years on Tuesday and other major currencies also gained as a pause in rising oil prices helped investors reverse the previous session's shift towards the dollar.

Trade remained shaped by the prospect of upcoming U.S. rate cuts, which has pressured the dollar in recent weeks. Investors see a rate cut at the Federal Reserve's September meeting as all but certain, with debate now focused on the possibility of a 50-basis-point cut instead of 25.

Sterling has been one beneficiary of the weakness in the U.S. currency, and on Tuesday the pound hit its highest since March 2022, and was last up 0.25% at $1.32195.

It got support from the contrast between Friday's remarks by Federal Reserve Chair Jerome Powell, which underscored market pricing for meaningful U.S. rate cuts starting next month, and the more cautious comments of Bank of England Governor Andrew Bailey.

The euro was up a whisker on the dollar at $1.1166, just off Monday's 13-month top.

The yen was weaker with the dollar up 0.22% at 144.8 yen.

All of that left the dollar index at 100.88, just off a one-year low.

San Francisco Fed President Mary Daly also said on Monday a quarter-percentage point reduction in borrowing costs next month was likely.

Markets have already fully priced in a rate cut next month, and see about 100-basis-points worth of easing by the end of the year.

Elsewhere, the Australian dollar gained 0.16% to $0.6782, not far from a one-month high of $0.67985 hit on Friday, and the Swiss franc was at 0.8466 per dollar - around its strongest in three weeks.

Source : Reuters