The pound surged as Theresa May gave a speech outlining her plans for Britain's exit from the European Union.
Sterling was up two per cent against the dollar at $1.23 by the time the PM had completed her long-awaited speech.
Against the euro, the pound climbed from €1.13 to €1.14.
The pound began to rise as Mrs May spoke at the Mansion House, central London, setting out a Brexit strategy that means quitting both the current EU customs union and the single market.
Sterling was trading up against the US dollar ahead of the speech at $1.21 but experts had put that down to weakness in the US currency.
The pound was down slightly against the euro at €1.13 in morning trading.
Sterling had plummeted on Monday morning amid reports the PM would use the speech to outline her proposal for a so-called hard Brexit and for Britain to quit the single market.
Neil Wilson, senior market analyst at ETX Capital, said: "We're expecting a wild ride for the pound today.
“These gains are largely down to dollar weakness, however, as the greenback has suffered a bit of a sell-off overnight and gold has risen amid a bid for safer assets ahead of this speech and Donald Trump's inauguration on Friday."
He added that another reason the pound is not in negative territory is because details of Mrs May's speech that have been made public, such as plans to leave the single market and customs union, represent nothing new.
"Traders are waiting for more detail from the PM before making big decisions," Mr Wilson said.
During the speech, the Prime Minister said she does not want an outcome which leaves the UK "half-in, half-out" of the European Union.
Mrs May said she wanted a "truly global Britain" which will be "more outward-looking than ever before" and will remain "the best friend and neighbour" of the other 27 members of the EU.
But she insisted she was not "seeking to hold on to bits of membership" or to achieve a "partial" or "associate" membership of the EU.