Sterling yesterday hit a three-month high against the dollar on the back of new data suggesting the UK housing market is continuing to stabilise - although many currency watchers believe the pound remains poised for further falls. Upbeat news from property website Rightmove said there were growing signs the past year's price falls have bottomed out, and the Council of Mortgage Lenders also said gross lending had hit a six-month high in June. House prices in England and Wales climbed 0.6% in July after falling 0.4% during the previous month, according to Rightmove. In annualised terms, prices fell 3.1%, the smallest decline in a year. At the same time, the Bank of England yesterday released a report showing mortgage lending from the six major banks had increased in June. The Council of Mortgage Lenders revealed that while UK gross mortgage lending tumbled 48% to an estimated £12.3bn in June, compared with £23.8bn a year earlier, last month's figure marked a 17% increase on May. All of this, along with the beleaguered dollar, conspired to push up the value of sterling on world currency markets. One pound yesterday bought $1.6468 in late trading, compared with $1.6322 the previous day - although earlier it had reached $1.6518. Sterling also inched ahead against the euro. One euro yesterday bought 82.26p. Nonetheless, a number of analysts insisted sterling's strength was above all the story of dollar weakness. The US greenback fell further yesterday, hitting its lowest level against sterling in three weeks. Some traders were dubious over whether sterling's recent climb could be sustained for much longer, regardless of its support from the housing data and improvements in international appetite for risk. Some said that sterling's short-term support masked an underlying deterioration in confidence and that debt fears remained a key influence. Confidence surrounding the UK fundamentals is expected to deteriorate and may soon expose the currency to heavy selling pressure. The focus this week for sterling will centre on the release of the minutes to this month's Monetary Policy Committee meeting tomorrow, as well as second quarter GDP on Friday. Investors will scrutinise the minutes for reasons behind the Bank of England's decision not to expand its quantitative easing scheme. Also yesterday, the price of gold rose more than 1% as oil climbed and the dollar hit a six-week low against the euro, boosting bullion's appeal as a currency hedge. US gold futures on the New York Mercantile Exchange rose $11.90 to $949.30 an ounce, a five-week high.

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