LONDON - Sterling edged higher on Wednesday against a broadly weaker dollar as the U.S. coronavirus relief package stalled in Congress and U.S. bond yields sank.
Sterling climbed back toward pre-pandemic highs and was advancing towards a five-month peak hit last week versus the greenback.
The British currency rose as much as 0.3% to $1.3106 against the dollar earlier on Wednesday. It was up 0.2% to $1.3097 by 0913 GMT and down 0.16% at 90.43 pence against the euro.
The pound has had a strong recovery against the dollar in the past few months. It registered its biggest monthly rise in more than a decade in July, although Stephen Gallo, European head of FX strategy at BMO Financial Group, said the surge had more to do with the dollar's weakness than the pound's strength.
"It's all about the dollar," Gallo said. "Congress has not been a able to pass an aggressive fiscal stimulus package for the last month or so and you can roughly trace the beginning of the dollar fall to that."
Democrats in the U.S. Congress and White House negotiators are in talks on a new coronavirus relief bill after a deadline was missed on Friday to extend enhanced unemployment payments during the pandemic.
A Bank of England policy meeting later this week and fears of a second wave of infections capped the pound's advance.
A new study claimed on Tuesday that a second wave of the pandemic could be twice as bad as the initial outbreak in Britain.
British Prime Minister Boris Johnson said last week he would postpone the next stage of lockdown easing for at least two weeks due to a pick-up in infection rates.
Growing pressure to strike a Brexit trade deal before a transition period ends in December is also prompting investors to become wary of the pound's prospects.
(Reporting by Joice Alves Editing by David Holmes) ((Joice.Alves@thomsonreuters.com; Reuters Messaging: email@example.com))