Sterling rose a quarter of a percent on Tuesday as hopes grew for a Brexit deal breakthrough, encouraging investors to buy the British currency with the struggling dollar also fueling gains.
The European Union is preparing to back a compromise proposal on the Irish border to resolve the last major hurdle in Brexit negotiations, the Times of London reported on Monday.
The British currency rose to a two-week high of $1.3085 in early London trading.
Against the euro the pound rose 0.1% to 87.25p, close to a five-month high of 87.23p hit on 10 Oct.
Hopes of a deal have lifted the pound in recent days with the British currency rising 3% versus the dollar this month.