(Bloomberg) -- The pound sank more than 2% as traders piled back into the dollar on bets that the Federal Reserve will stick to hiking interest rates.

Sterling fell as low as $1.1227, snapping six days of gains, its best streak since April 2021. The move was led by the greenback, as markets faded the prospect of the Fed pivoting to a more dovish stance following better-than-estimated US data and policy maker comments.

The pound remains significantly above its all-time low reached on Sept. 26, when it crashed due to concerns over the new UK government’s fiscal plans. Prime Minister Liz Truss has since rowed back on a proposal to cut income tax for the highest earners, though doubts remain in markets over the country’s debt sustainability.

“This is probably the sell zone for this pair given how from out of the woods we really are here still,” Brad Bechtel, global head of currencies at Jefferies, wrote in a note referring to the pound’s recent rally to $1.14-$1.15. “This thing moves so fast we could be back down at $1.1000 in a blink of an eye.”

Hedge funds added options betting against the pound earlier in the London session, according to Europe-based traders. These so-called cable put spreads will pay out should sterling weaken versus the dollar but have a pre-determined maximum profit.

Truss Seeks to Rally UK Tories, Saying Disruption Is Needed

It’s the latest volatility to grip UK markets in a turbulent few weeks. Truss sought to reassure her Conservative party on Wednesday, promising to keep an “iron grip” on the country’s finances, stating that she believes “in sound money and a lean state” and pledging to cut debt as a proportion of national income.

Yet UK government bonds also slid again as the Bank of England opted not to buy any in its daily operations, after it started propping up the market to stem a rout last week.

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