It was last up 0.1 percent on the day at $1.6215. Traders said sterling was also lifted in thin trade by year-end demand for the currency from companies looking to hedge and from central banks. UK annual consumer price inflation unexpectedly remained at 2.7 percent in November after a surprise jump the month before, which is likely to reinforce the central bank's concerns about price pressures proving persistent. The market consensus had been for inflation to dip to 2.6 percent.
Some analysts said the pound could lose some ground if the minutes from the bank's latest Monetary Policy Committee (MPC) meeting show a more dovish bias. "Sterling has been quite resilient in the last few sessions," said Audrey Childe-Freeman, currency strategist at BMO Capital Markets.
The euro was flat against the pound at 81.23 pence, trading down from Monday's near two-month high of 81.55 pence. Against the dollar, the euro was near a 7-1/2 month high. Analysts said sterling was also benefiting by default from expectations of aggressive easing measures in Japan, which would hurt the yen, and from last week's decision by the US Federal Reserve to loosen policy further, which was weighing on the dollar.