Sept 26 Reuters Sterling rose on Thursday to within striking distance of its twoandahalfyear peak against the dollar after China39;s stimulus plan boosted investors39; risk appetite.

The pound usually appreciates when investors go for risky assets such as equities, which jumped on Thursday.

Monetary policy divergence between the Bank of England and other major central banks is also providing support to the British currency.

Stickierthanexpected UK inflation has fed expectations for a more gradual BoE easing cycle, while the Federal Reserve39;s focus has shifted to the need to support the labour market by easing monetary conditions.

We think higher yield differentials will support the pound against the dollar over time, said Patrick Ernst, director of forex investment strategy at UBS.

We expect the pair sterling versus dollar to gradually move higher but note that temporary setbacks are possible following the latest rally, he added.

Sterling rose 0.24 in morning trade to 1.3350 after hitting 1.34275 on Wednesday, its highest level since February 2022.

Analysts forecast similar economic and monetary policies in the UK and in the euro area.

Higher yield differentials and a further pricing out of political risks will lend modest support to the pound over time versus the euro, UBS39; Ernst said, adding that he expects the pound to remain rangebound at 8385 pence per euro.

Against the common currency , the pound rose 0.15 to 83.45 pence after trading on Tuesday…