LONDON (Reuters) - Sterling was slumped near a three-month low against a resurgent dollar on Wednesday and also lost ground on the euro, as global growth jitters, high energy prices, and higher U.S. yields remained supportive of the greenback.
The pound was last a touch lower against the dollar at $1.2556 having shed 0.5% a day earlier, when it touched its lowest since mid June. It is already down nearly 1% in September.
The British currency's decline was in line with broader moves. {{2126|The dodollar index, which tracks the unit against six major peers including the pound, rose 0.65% on Tuesday - its biggest daily gain since March - on the back of data showing weak Chinese and European economies versus a comparatively resilient United States, and higher oil prices.
The pound was the best performing major developed market currency against the dollar in the first half of the year, with better than feared British economic data and sticky inflation driving expectations that the Bank of England would keep raising rates longer than most other peers.
"The pound has been in a period of consolidation after a strong rally on the back of rate hike expectations which peaked at around 6% and since then have been pared back," said Lee Hardman senior currency analyst at MUFG.
He said the latest driver for the lower expectations for a peak BoE rate was recent comments from BoE chief economist Huw Pill that the central bank will keep rates higher for longer, rather than continue to raise aggressively.
A further 25 basis point bank rate increase to 5.5% at the BoE's next meeting later this month is nearly priced in. Markets also expect a further 25 basis point hike in this cycle, though the timing of that is uncertain.
The pound was also weaker against the euro, which rose 0.28% to 85.6 pence, and the Japanese yen.
The pound fell 0.3% 185.07 yen, after Japan's top currency diplomat gave his strongest warning since mid-August about intervention to support the weak yen.
The pound, last week, hit its highest since 2015 against the yen.