It is a polite British way to be however your hands should be on the steering wheel and your eyes on the road. Safety before pleasantly waving to another motorist.
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What does everyone else think ......
Example - You're driving along when a road sign states give way to oncoming traffic, a sign that is stated in The Highway Code. So you do as you're instructed, you wait to let the incoming car pass.
Is it necessary for the driver of the car that has the right of way, to flash lights or raise a hand in thanks ( or both ) despite the fact you're not doing it out of kindness, you're doing it because its the rules of the road. No-one does it at traffic lights so why do some people feel the need to say thank you otherwise!
Personally, if I do as the road signs instructs me to do, I feel compelled to raise my hand in thanks then ask myself was that necessary ? 
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