LONDON: Sterling rose to a four-month high against the dollar on Friday after the Federal Reserve embarked on a fresh round of monetary easing that dented the US currency. Equities and perceived riskier currencies, including sterling, gained after the Fed said it would pump $40 billion into the world's biggest economy each month until it saw a sustained upturn in a weak jobs market. The pound rose 0.2 percent to $1.6206, its strongest since early May, and traders said it had the potential to rise further towards this year's high of $1.6304. It was last at $1.6195. The Fed's third bout of quantitative easing was perceived as particularly dovish because the central bank kept open the amount of assets it could purchase in order to support the economy. "Sterling has more upside against the dollar after the Fed announced (potentially) unlimited amounts of QE ... It should be in for a prolonged period above $1.60," said Alex Lawson, senior dealer at Moneycorp. However, the pound fell to a 10-week low against a buoyant euro which was lifted by falling Spanish and Italian bond yields in the wake of a bold plan announced by the European Central Bank last week to tackle the region's debt crisis. The euro rose 0.15 percent to 80.565 pence, its highest level since early July. The single currency has risen strongly since Germany's Constitutional Court on Wednesday gave the green light to the euro zone's new rescue fund, paving the way for the ECB to implement its plan to lower borrowing costs for struggling countries. More gains could take the euro towards chart resistance at the 200-day moving average of 81.48 pence, although the pound could also be lifted by recent data suggesting Britain could be set to exit recession and may outperform the euro zone. "Enthusiasm for the euro could wear off as the ECB plan is only buying time ... Eighty pence (in euro/sterling) does feel about fair value at the moment and it is likely to continue to fluctuate around that level," Moneycorp's Lawson said.

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