Reports that the UK government is planning to allow tax-free repatriation of foreign profits to multinationals based in the country has seen the sterling rise against the dollar, Bloomberg reported.

It was the second day of increases for the pound, with the UK currency trading at $1.9783 this morning in London.

According to the Financial Times report, the Treasury hopes that its new proposals will improve the tax system's competitiveness as it comes into line with the rest of Europe.

In response to the news, the pound climbed for a second day against the US currency.

Speaking to Bloomberg, head of global currency strategy at Singapore's Standard Chartered Bank Callum Henderson said the proposals could have a similar effect on the British economy that the Homeland Investment Act had on the US.

He added that this is "certainly a good excuse to buy pounds".

Reuters reported that growing strain on trade relations between the US and China weakened the dollar.

In the UK, house price and trade figures are expected to impact on the pound later this week, the agency added.