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June 14 (Bloomberg) -- The pound strengthened against the dollar after a report showed U.K. inflation held at the fastest pace since October 2008 in May, stoking bets that the Bank of England will raise interest rates.
The pound rose 0.2 percent to $1.6403 at 8:25 a.m. in London. It was little changed against the euro at 88.12 pence.
U.K. government bonds stayed lower, with the 10-year yield three basis points higher at 3.28 percent. The two-year note yielded 0.85 percent.
Short-sterling futures slipped, signalling traders were adding bets on an increase in U.K. borrowing costs. The implied yield on the June 2012 contract rose one basis point to 1.2 percent.
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