The prospect of US tax reforms has buoyed global stock markets but knocked the dollar, sending UK shares and sterling higher.
The FTSE 100 ended the day up by 0.62% or 46.44 points at 7,537.01, trending higher alongside its US and European peers including the French Cac 40 and German Dax which rose 1.3% and 1.6%, respectively.
David Madden, a market analyst at CMC Markets UK, said: "There is talk US lawmakers will pass the pro-business tax cuts that President Trump proposed this week, and that has been fuelling global investor sentiment.
"The prospect of tax cuts being approved ahead of Christmas is propping up global stock markets."
But the proposals had the reverse effect on America's currency, which is "under pressure as traders are questioning how much growth it will actually bring to the US economy," Mr Madden said.
"US spending by consumers hasn't been that impressive lately and traders are using this opportunity to trim their long positions in the US dollar ahead of the potential vote on US tax reform this week."
The weaker greenback supported the pound, which was trading 0.6% higher against the US dollar at around 1.340.
Sterling's gains against the euro were relatively muted, up 0.17% at 1.134.
Investors were also taking stock of data showing that the UK manufacturing industry enjoyed strong order book levels over the three months to December, thanks to strong demand for motor vehicles and transport equipment.
But while the Confederation of British Industry (CBI) industrial trends survey showed that 14 of the 17 areas of manufacturing enjoyed "above normal" order book rates, the strength of export order books eased back slightly.
In oil markets, Brent crude prices were up 0.4% at 63.47 US dollars per barrel as supplies were knocked by the continued outage of the North Sea Forties pipeline, as well as a strike by oil workers in Nigeria which began on Monday.
In UK stocks, Babcock International shares were among the best performers on the blue chip index, closing higher by 22p at 706.5p.
The engineering services group has been awarded a 10-year contract - that will be worth up to £95 million over the first three years - to supply the Sellafield nuclear site with specialist handling and containment systems.
At the other end of the spectrum, EasyJet shares were at the bottom of the FTSE 100, trading lower by 40p at 1,377p.
That is despite the airline confirming the acquisition of part of bankrupt German carrier Air Berlin in a deal worth 40 million euro (£35.2 million), just a week after the European Commission gave the deal the all-clear.
The transaction will see the budget airline take control of Air Berlin's operations at the capital's Tegel Airport, with easyJet leasing 25 of its aircraft, while taking over landing slots and offering employment to the defunct carrier's flying crew.
The biggest risers on the FTSE 100 were Anglo American up 70.5p at 1,480.5p, Old Mutual up 9.7p at 213.1p, Babcock International Group up 22p at 706.5p, and Rolls-Royce Holdings up 24.5p at 855.5p.
The biggest fallers on the FTSE 100 were EasyJet down 40p at 1,377p, WPP down 24p at 1,365p, Morrison Supermarkets down 2.1p at 213.4p, and BT Group down 2.2p at 275.35p.
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