Forex Focus: Sterling comes from back of the pack Sterling is 8pc higher against the dollar since July pushing ahead to over $1.60. The Fed's surprise decision to hold off from tapering its asset purchases last week and to keep interest rates unchanged caused the dollar to falter, but is this a temporary setback? "As US economic data shows improvement in the coming months tapering speculation will be rife once again, building dollar strength," says Sasha Nugent of CaxtonFX. With the possibility of tapering still on the table, I believe a reversal will begin to take place over the coming months. Euro It's a mixed and volatile picture with the single currency. At the end of last year, one pound bought €1.24, while this year it trades in a range between €1.14 and €1.19. "Cracks in the eurozone have been papered over but the problems still need to be addressed," says Alex Edwards from UKForex. If the UK's economic recovery continues on its current path, and if the Fed does start its tapering program by the end of the year, we expect support for the euro to wane, causing sterling potentialjly to push over 1.20 again. The danger with the eurozone is that its problems can spill over to harm Britain but a rate cut by the European Central Bank would help lift the pound. "My belief is that in the short to medium term we will see further good news for sterling against the euro, where debt problems run deep," says Charles Purdy of Smart Currency Exchange. Aussie dollar The pound is currently 13 cents higher against the "Aussie" than it was at the beginning of January, marking a three-year high. Josh Ferry Woodard of Tor FX says: "With the Reserve Bank of Australia acutely aware that falling Chinese demand for the nation's mining exports could severely impact the Australian economy, a further rate cut is possible in the final 3 months of 2013, which would lead to even better sterling rates." Canadian dollar Currently at a three-year high, the pound is around 3 cents better off this year. "Tighter policy from the Federal Reserve south of the border will hurt the CAD, moving forward, and I am still expecting CAD to weaken through the rest of the year," says Jeremy Cook of World First. New Zealand dollar After a big dip early in the year, the pound is close to the level at which it began 2013. Ferry Woodard says: "The next move is likely to be sterling positive as policymakers continue to mull over the pros and cons of another interest rate cut." Cook thinks the Royal Bank of New Zealand is unlikely to cut rates anytime soon, while Nugent predicts a rate increase in 2014. South African rand Sterling appreciated by more than 10pc against the rand during August but since then it has clawed back 3pc. Edwards says: "Demand for gold and SA's mining stocks have soared. Despite gold's recent rally, GBP is still at four-year highs against the rand.