Sterling hit two and a half-year highs against the dollar today and set a nine month high to the euro as investors continued to bet that rapid Covid-19 vaccinations would set Britain up to recover from its biggest drop in output in 300 years. 

The pound rose to $1.3955 against the dollar - its highest since April 2018 - in Asian trading, paring some of those gains to trade 0.15% higher at $1.3926 in later trade. 

Against the euro, it reached 87.06 pence, its highest since May 2020, last trading flat at 87.20 pence per euro. 

Speculators have increased their long positions on the pound - bets that the currency will appreciate against the dollar - for a second consecutive week in the week up to last Tuesday, CFTC data showed. 

Britain's coronavirus-ravaged economy suffered its biggest crash in output in more than 300 years in 2020 when it slumped by 9.9%, data showed last week. 

Still, sterling is the best-performing G10 currency this year, up 2% against the dollar, and 2.5% against the euro. 

The pound's outperformance against the euro is attributed by analysts to a slower vaccine rollout in other European countries.

Meanwhile, expectations of large fiscal stimulus in the US and an overall negative outlook on the dollar have given the pound/dollar exchange rate - known by traders as "cable" - a boost. 

Investors betting on a rebound in global growth - known as the reflation trade - have also contributed to sterling's gains as the currency is considered correlated with growth and risk sentiment.