LONDON: Sterling hit a 3-1/2 month high versus the dollar on Friday, tracking gains in the euro against the safe-haven greenback after the European Central Bank unveiled a plan to lower high euro zone borrowing costs. The euro zone is the UK's biggest trading partner and any easing of the debt crisis is seen as positive for sterling, especially against the dollar. ECB President Mario Draghi announced on Thursday that the bank would undertake unlimited, short-dated bond purchases under strict conditions to ease funding pressures on governments that sought help. The pound climbed to a 3-1/2 month high of $1.5962, rallying in line with the euro after Spanish 10-year borrowing costs fell below 6 per cent for the first time since May. Traders said there were central bank offers around $1.5970, and UK importers were looking to sell ahead of $1.60. "The move up in euro/dollar suggests cable (sterling/dollar) can go to $1.60. The world has been in a pretty grim place for the last three months and this plan is something that offers a firewall," said Gavin Friend, currency analyst at National Australia Bank. Riskier currencies could extend gains against the dollar if U.S. non-farm payrolls data, due at 1230 GMT, meets expectations that 125,000 jobs were added in August. That would add to signs that growth in the world's largest economy is holding up. The pound edged lower versus a broadly stronger euro, with the shared currency up 0.1 per cent on the day at 79.39 pence. Sterling investors were also focused on UK industrial and manufacturing data, released at 0830 GMT, that could strengthen demand for the pound. "Industrial production numbers this morning could see some interest as we expect a rebound from the sharp declines seen in June, largely the result of the Diamond Jubilee bank holiday," Lloyds analysts wrote in a note. "However, sterling/dollar looks likely to be dominated by market sentiment and the outcome from the NFP (non-farm payrolls)."

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