Following a brief bounce on Wednesday on better than expected economic data, the dollar continued to fall against sterling in foreign exchange trading on Thursday.

The pound traded at a high of $1.97 before the dollar rallied to $1.9675, while the euro stood at $1.3255 and dollar to yen exchange stood at ¥115.60.

The sterling rate is a 14-year high, last seen in September 1992, just before the UK's exit from the European Exchange Rate Mechanism and suggests that the two dollar pound is closer than anticipated.

Over the course of the year, the dollar has lost 14 per cent of its value versus the pound as the UK enjoyed an economic boom combined with high interest rates.

"The background of high interest rates and a firm economy is helping sterling," Tim Fox of Dresdner Kleinwort told Bloomberg.

"Sterling will continue to remain firm and we expect it to make gains up to the $2.10 level next year."