FRANKFURT, Germany (AP) - The battered British pound rose sharply after the head of the Bank of England made remarks that could be seen as bringing an interest-rate increase closer.
The pound traded 0.9 percent higher on the day at $1.2934.
The pound's value against the U.S. dollar jumped after the Bank of England governor, Mark Carney, said in remarks prepared for a conference in Sintra, Portugal that as the economy improves the central bank would be less tolerant of above-target inflation. Central banks use rate hikes to fight inflation.
He also said that "some removal of monetary stimulus is likely to become necessary" as growth reduces spare capacity in the economy.
Carney said that the bank's rate-setting committee would debate the issue "in the coming months."
The pound has sagged since Britain's decision to leave the European Union, boosting inflation by raising import prices.
The Bank of England cut its official bank rate to 0.25 percent on Aug. 4, 2016. The bank rate had been at 0.50 percent since 2009.
The jump in the pound comes a day after European Central Bank head Mario Draghi sent the euro higher against the dollar by indicating the ECB could slowly withdraw some of its monetary stimulus measures as the economy improves. Higher interest rates relative to other currencies can send an exchange rate higher by increasing demand for fixed-income investments in that currency.