* Sterling up 0.1 pct against dollar at $1.6490
* Monday saw highest opening price in 28-months
* Consolidating gains after Friday rally
By Shadi Bushra
LONDON, Dec 30 Sterling was up slightly in thin
trading on Monday after reaching nearly two-and-a-half year
intraday highs last Friday.
Investors overall are positioning themselves for the
possibility of a sooner-than-expected Bank of England rate hike.
The pound was up 0.1 percent against the dollar to trade at
$1.6490 at 0950 GMT, extending last week's rally into
the final days of the year.
Sterling saw significant gains against the dollar on Friday
as an option barrier was erased at $1.6500 in thin trading.
Subsequent profit-taking prompted a retreat from a 28-month high
of $1.6577 to close the last full week of 2013 at $1.6486.
The pound is on track to post gains against the dollar for
the year, driven in the past six months by a string of data
indicating a stronger-than-expected economic recovery in
Britain, including last Tuesday's mortgage acceptance figures.
"You have a banking system that clearly is functioning
better and more credit is being extended, albeit not to places
that the Bank of England wants it to be, like the housing
market," said Stephen Gallo, an FX strategist at BMO Capital
Markets. "When you have a situation where certain markets are
getting pretty hot, capital flows in and currencies appreciate."
Sterling has also been buoyed by expectations that these
signs of an accelerating British recovery could prompt the Bank
of England to raise rates sooner than previously thought in
order to keep the economy from overheating.
The pound was stable against the euro, trading at 83.40
pence, as the euro consolidated the previous
The euro's strong performance last week was seen as
reflecting some last-minute position adjustments by European
banks, which were thought to be repatriating funds to shore up
capital ahead of an ECB asset review.