British Pound Rising Again

The pound hit a multidecade high against the dollar Thursday on expectations British interest rates are going to rise, but then pulled back on worries the rally had gone too far.

One pound would buy $2.0799 recently, up from $2.0793 late Wednesday, but that was off the session highs of around $2.085. The iPath GBP/USD Exchange Rate(GBB Quote) was rising 0.7%.

"The Bank of England has made no bones about its willingness to raise interest rates again soon," says Gregory Miller, chief economist at SunTrust Bank in Atlanta. That stands in stark contrast to expectations that the Federal Reserve, which has been cutting rates in recent weeks, will at the very least leave them unchanged in the near term.

But some market observers say the rally in the pound, which has shot up from a low of $1.98 in August, may now be due for a correction.

"We are definitely in what we call nosebleed territory," says Rich Ishida, president of Pasadena, Calif.-based sentiment-measuring firm MarketVane. "Usually when you have extreme moves like this, you get profit-taking and pullbacks."

Ishida says the bullish consensus for the pound is now 92%, a 24-month high.

Elsewhere in the currency markets, the dollar was trading at 114.625 Japanese yen, down from 115.35 yen at the end of the last session. The euro was selling for $1.4411, down from $1.4486 a day earlier.

The CurrencyShares Euro Trust(FXE Quote) was dipping 0.4%, and the CurrencyShares Japanese Yen Trust(FXY Quote) was adding 0.7%.