Pound rises to a high against the dollar on Fed gloom

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The pound rose 0.74 cent to $1.5345, its highest level since early May, and the euro gained 0.88 cent to $1.2832.

British Government bonds also rose, pushing the yield on 10-year gilts down to 3.36%.

The US central bank cut its growth forecasts for 2010 from 3.45% to 3.25% and revealed it is ready to consider additional steps, such as printing money, to boost the economy if it took a turn for the worse.

"The Fed was rather cautious and pessimistic about the US economic outlook, which is negative for the dollar," said Commerzbank currency strategist Youna Park.

The pound fell from above $2 to below $1.40 during the financial crisis.

It has risen 7% against the greenback since mid-May amid signs the UK economy is on the mend and the Britain's record levels of debt are being tackled.