Sterling jumps vs. dollar on share gains

By Jessica Mortimer

LONDON (Reuters) - Sterling rose to a three-week high against the dollar on Monday as sharp gains in equities and commodity prices boosted investors' appetite for risk and lifted perceived higher risk currencies.

Increased optimism on the global economic outlook following stronger-than-expected U.S. corporate earnings last week fuelled demand for riskier assets, with sentiment bolstered further by news of a $3 billion (£1.8 billion pounds) rescue of U.S. lender CIT Group CIT.N.

This lifted sterling, along with currencies such as the Australian and New Zealand dollars, as UK equities jumped 1 percent .FTSE.

An additional boost came from an upbeat UK housing market survey from property website Rightmove on Monday, which gave further evidence that the UK housing market may be over the worst.

"This is a general story of dollar weakness, prompted by the CIT rescue deal, and a rise in risk appetite which has benefited sterling," nabCapital currency strategist Gavin Friend said.

He added that further gains were likely to be limited as the market awaited U.S. Federal Reserve Chairman Ben Bernanke's semi-annual testimony to Congress on Tuesday, while Wednesday's Bank of England minutes would also be key for sterling.

At 3:47 p.m. British time (1447 GMT), sterling rose 0.8 percent against the dollar to $1.6460, having earlier hit a high of $1.6551, its strongest since the start of July. The gains came as the dollar fell to its lowest in six weeks against a basket of currencies.

The euro fell 0.1 percent against the pound to 86.26 pence, which helped sterling rise 0.5 points on its trade-weighted index to a high for the day of 83.3.