The pound (GBPUSD=X) pushed 0.5% higher against the dollar on Tuesday as the month of November drew towards its end.
Sterling was trading at $1.2017 at the time of writing, while it was 0.1% up against the euro (GBPEUR=X) at €1.1574.
The US greenback has lost ground over recent weeks amid an ongoing recovery in global equity markets. The pound is currently trading near a three-month high due to the recent depreciation in the dollar and less UK political uncertainty.
"Global equity markets were broadly firmer in November. In FX, the USD has underperformed across the board on the month. Overall, the moves in equity markets, when adjusted for market capitalisation and FX performance this month, suggest month-end portfolio-rebalancing flows are likely to be mild USD selling across the board," Valentin Marinov, head of G10 FX strategy at Crédit Agricole, said.
But James Athey, investment director at abrdn, warned: "We think the easy gains have been had for now. The reality is that a recession is coming, and a Fed rescue is coming less quickly than in recent years.
"We see that reality as a coming cold shower for buoyant risk markets and as ever we expect the dollar to benefit from the resultant flight to quality. With the UK economic outlook being even worse, this portends an unhappy combination for sterling."
The dollar has also been knocked against most currencies by news of unrest in China over the country’s coronavirus-related restrictions.
China’s National Health Commission has now announced it will boost vaccination among its senior citizens amid pressure to shift from its zero-COVID policies. It will also reduce the time gap between basic vaccination and boosters to three months for those aged 80 and above.
Lee Hardman, a currency analyst at MUFG, said: "New cases have risen sharply in recent weeks which is increasing the risk of tighter restrictions and a more marked growth slowdown heading into year end. Those fears should offer some much-needed support for the USD.”
Meanwhile, on Monday, the Bank of England said it received bids totalling 2.39 times the £750m of gilts with a maturity of 7-20 years which it sold at auction.
It came as the UK housing market showed further signs of cooling on Tuesday as Bank of England data revealed a fall in mortgage approvals.
Karen Noye, mortgage expert at Quilter, said: “As we move further into the winter and the temperature drops, increased energy bills alongside greatly increased mortgage payments may result in more and more people being unable to afford to stay in their current homes.
“If this is the case – and the level of demand continues to decrease – we will likely see a subsequent reduction in house prices and a switch from the seller’s market seen in recent years to a buyer’s market.
Watch: How does inflation affect interest rates?