LONDON: Sterling hit a three-week high against the dollar on Tuesday, rising above $1.32, with speculators cutting bets against the currency as data suggested that Britain’s economy is holding up surprisingly well in the aftermath of the Brexit vote. 

Orders for British manufacturing exports hit a two-year peak in August, data released on Tuesday showed.

The Confederation of British Industry said its measure of overall factory orders dipped slightly in August to -5. That beat a median forecast of -9 while export orders improved to -6 from -22, their highest since August 2014.

July inflation and retail sales numbers released last week beat forecasts, adding to signs that consumers had yet to rein in spending after June’s vote to leave the European Union. Lower than expected jobless claims also gave the pound a lift.

Sterling rose as much as half a percent to $1.3210, its highest since Aug. 4. It rose 0.3 percent against the euro to hit 85.85 pence, its strongest in 11 days, as speculators and hedge funds trimmed bets against the pound.

“Last month the British managers’ indices plunged sharply. But recent labour market data has been surprisingly strong, which investors regarded as a sign that the economy has not suffered a severe setback, so far,” said Thu Lan Nguyen, currency strategist at Commerzbank.

“Still, it is too soon to sound the all-clear … and downside potential for the pound remains high.”

Data released by the Commodity Futures Trading Commission on Friday showed positioning is stretched, with sterling net short positions reaching a record high of 94,238 contracts in the week to Aug. 16. Traders said some speculators were unwinding bets and booking profits.

“With bets against the pound overcrowded, it does not take much for the currency to rally in the short term. In August we have seen a trading range of $1.3371 to $1.2863 and currently there is an increasing amount of corporate orders being placed targeting a further rise towards the $1.33 price area,” said Nawaz Ali, currency analyst at Western Union.

Sterling hit a three-decade low of $1.2798 on July 8 and has been trading not far from that trough on expectations that the Bank of England may have to ease monetary policy further in coming months.

The central bank cut rates to a record low this month and restarted an asset-buying programme to cushion the economy from an expected post-Brexit slowdown.

On Tuesday British government bond prices jumped after the Bank of England received fewer offers than last week for its purchase of long-dated gilts under its bond-buying programme.

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