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Pound back over $1.30 near nine-month high

The British pound is keeping its head above $1.30 in Asian trade as debate over whether central banks may start to dial back monetary policy stimulus kicked up a notch this week.

The European Central Bank was one of the focal points this week after Mario Draghi, its president, talked up the currency bloc’s economic outlook, prompting speculation among traders the central bank may next year start to wind down its stimulus programme.

Over the past fortnight, debate about whether the Bank of England might soon be plotting a similar course has propped up the pound. Mark Carney, the BoE governor, hinted on Wednesday he was becoming more upbeat about the country’s economic prospects a year after the Brexit vote for the UK to leave the EU.

Sterling was 0.1 per cent higher at $1.3018 on Friday and hovering close to its highest level in nine months. It is a touch short of the $1.3036 close in mid-May that was the highest since September 28.

Tumbling UK gilts have been one aspect of this week’s sell-off in the global government bond market, which has been triggered by growing expectations of central bank stimulus being wound down in coming months. Mr Carney’s comments have also helped push the 2-year gilt yield (which moves inversely to price) above the BoE’s 0.25 per cent policy rate for the first time since late October.