The Footsie finished 86.29 points or 1.6% higher at 5382.67, its highest close since mid-September last year, having touched an intra-day peak of 5396.96.

Broad weakness in the dollar lifted commodity prices and mining stocks were the big gainers as the Footsie continued its recent strong run. Shares in oil companies advanced with the price of crude.

Global stock markets were yesterday supported by relatively solid US retail sales figures.

The pound was last night trading above $1.68 – up about 1.4 cents on its pre-weekend close in London.

Sterling also advanced against the euro, pushing the single currency below 89p. The euro was last night trading around 88.98p – down about 0.35 pence on its close in London on Friday.

Ben Bernanke, chairman of the US Federal Reserve, said yesterday that the central bank would keep a close eye on the sliding US dollar but also signalled benchmark interest rates would be held at record lows to nurture economic recovery.

Such a benign interest-rate outlook is one key factor which could weigh on the dollar. “We are attentive to the implications of changes in the value of the dollar,” Bernanke told the Economic Club of New York, in rare remarks about the US currency.

However, signalling no hurry to raise interest rates, he predicted inflation would probably remain “subdued for some time” in spite of the recent rise in oil prices.

Bernanke predicted the US economy should continue to grow next year, but warned of “important headwinds” that would restrain the recovery, including a weak job market and tight credit for small businesses and households.

Those forces “likely will prevent the expansion from being as robust as we would hope”, he said.

The FTSE 100 has surged from a close of 3512.09 on March 3 this year – its worst finish since the Iraq war month of March 2003.

But it remains well adrift of its peaks, having hit its record closing high of 6930.2 points at the end of 1999.