LONDON, Dec 30 - Sterling extended recent gains to an 11-year high against the dollar on Tuesday as the greenback came under broad pressure in seasonally-thin trade on concerns about the U.S. current account deficit. In Britain, research company Martin Hamblin GfK said its consumer confidence barometer rose to -5 this month from -6 in November -- the month the Bank of England raised interest rates for the first time in nearly four years. But the pound took its cues almost entirely from movements in euro/dollar, hitting a high of $1.7788 , a level not seen since the aftermath of its 1992 Black Wednesday debacle and its exit from the European Union's Exchange Rate Mechanism. "The dollar has to depreciate to correct the current account deficit. U.S. residents' interest in foreign assets is increasing. That means the U.S. has to attract even more to cover the deficit," said Marvin Barth, global currency economist at Citibank. "The UK economy is going to perform well and that is going to feed through interest rates. In that sense sterling is attractive. But that's priced into the market and it's not clear how that will benefit euro/sterling from here. For cable, that should behave like euro/dollar." By 1455 GMT sterling stood at $1.7783 per dollar. The latest surge has brought sterling's gains against the ailing dollar this year to more than 10 percent. The greenback fell to a record low against the euro of $1.2520 and hit its weakest level in seven years against a basket of currencies <=USD>. However, sterling held steady at 70.37 pence per euro , in the middle of the recent range. Its trade-weighted index, which has a euro weighting of 64.82 percent, a dollar weighting of 16.49 percent and a yen one of 7.0 percent, was also in a familiar level at 100.05 <=GBP>.
Britain joined the Exchange Rate Mechanism -- a system aimed at limiting short-term movements between European Community currencies -- in October 1990. But the government withdrew the pound from the ERM on September 16, 1992, after rate hikes of five percentage points failed to shore up sterling against a tidal wave of selling. The pound's forced exit proved to be a boon for British exporters and in the years following Black Wednesday the economy enjoyed low inflation and its longest period of uninterrupted growth since World War Two. Interest rates are currently at 3.75 percent but improving prospects for the domestic economy have already prompted the Bank of England to tighten policy in November and markets are largely pricing in the chance of another hike early next year.//