The pound looked set to end the week on a positive ground, after recouping some of the losses it recorded against the dollar in the previous session.

Sterling tumbled to a low as $1.2422 on Thursday (15 December), the lowest level since 28 November, as the dollar surged to multi-year highs against its main rivals after the Federal Reserve lifted interest rates for only the second time in a decade.

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However, by mid-afternoon on Friday, the pound was 0.26% higher the US currency, trading at $1.2449, and was unchanged against the euro, exchanging hands at €1.1919.

There was positive news for the British currency as a report from the Confederation of British Industry (CBI) showed that UK manufacturing orders hit a 20-month high in December, painting a better-than-expected picture for the industry.

However, CBI's chief economist, Rain Newton-Smith, noted the weak sterling remained likely to prove a disruptive force for the sector in the long-term.

"The weakness of sterling is pushing up the cost of imports, and our survey shows strong signs of this feeding through to higher factory gate prices," she said.

Elsewhere, the dollar relinquished some of the Fed-inspired gains and fell 0.25% against the euro to 0.9576 euro cents, after surging to a 14-year high against the common currency in the previous session.

Analysts, however, suggested the dollar remained well on course to hit parity with the euro in the coming 12 months, due to diverging policy between the European Central Bank (ECB) and the Fed.

"With the ECB extending its quantivative easing programme and the Fed on route to raising US interest rates next year, the explosive divergence in monetary policy between these two major central banks could ensure the euro/dollar remains depressed for prolonged periods," said FXTM research analyst Lukman Otunuga.

"The euro may be pressured as uncertainty intensifies ahead of the French and German elections while dollar revival should effectively make the euro/dollar a sellers dream."

Morgan Stanley's global head of FX strategy Hans W Redeker went even further, indicating the greenback could not only reach parity against the euro but also breach the ¥130 barrier.

The greenback was broadly flat against the yen, trading at ¥118.16, but rose against both its Canadian and Australian counterparts, gaining 0.28% against the former and %0.50 against the latter to trade at CAD$1.3373 and AUD$1.3642 respectively.