Meanwhile, new economic data released yesterday provided further support for the wager in the markets that base rates are set to go up with both money supply and demand for manufactured consumer goods growing strongly in November.
Both the money supply and the demand for manufactured consumer goods grew strongly again in November, showing that the consumer boom is continuing to swell and putting pressure on Kenneth Clarke to make a pre-emptive strike against inflationary pressures.
Sterling briefly passed the DM2.60 level before falling back slightly to DM2.5975 - still its strongest showing since February 1994. Meanwhile it rose by 0.5 to 94.5 on the trade-weighted index.
The Confederation of British Industry said: "The message increasingly coming back from our members is that the strength of the pound is very worrying and will increasingly jeopardise our export competitiveness."
Alan Armitage, chief economist at the Engineering Employers Association, said: "Clearly sterling's appreciation is going to make life harder in export markets. Manufacturers like the competitive edge that a lower currency brings and any appreciation in the pound will hurt."
He said, however, that it was too early to say whether the level of new orders was being affected while many exporters were already well- hedged against the stronger pound.
In the markets there seemed little end in sight to the pound's surge.
"Everybody loves sterling," said Joe Prendergast, currency strategist at Merrill Lynch. Speculators are betting that Mr Clarke will have to raise interest rates soon because economic growth and inflationary pressures are rising.
The Chartered Institute of Purchasing and Supply (CIPS) reported in its latest survey yesterday that the stronger pound had dampened overseas demand for certain goods as export prices rise.
However, the stronger pound also makes it cheaper for manufacturers to import components and raw materials - many of which are priced in dollars - thus helping to offset the effect on exports.
Despite the pressures on exporters, demand for British manufacturing in other areas remains strong. The Purchasing Managers' Index, produced by the CIPS to reflect the state of activity in the manufacturing sector, remained roughly stable at 54.4, compared with 54.5 in October.
Meanwhile, rising domestic demand is more than compensating for any squeeze on orders from abroad - particularly consumer demand. The CIPS index for output and new orders among manufacturers of consumer goods showed the sharpest rise of any sector.
Manufacturers of investment goods, on the other hand, saw new orders (for new plant and machinery) slow considerably in November, reflecting continued business reluctance to invest.
Adam Cole of HSBC James Capel said the figures showed that "growth remains heavily skewed towards consumers rather than investment. Given that the Budget shifted the tax burden away from consumers and onto businesses, this is bad news for medium-term growth".
Figures from the Bank of England on the money supply reinforced the evidence of strong consumer spending. MO, which shows the amount of notes and coins in circulation, grew by 7.5 per cent in the year to November, up marginally on the 7.4 per cent in the year to October.
This is far above the Government's monitoring range for M0 of 0-4 per cent.Reuse content