Bloomberg News

Pound Rises Versus Dollar on Europe Optimism Before BOE Minutes

October 19, 2011

Oct. 19 (Bloomberg) -- The pound rose against the dollar and the yen amid reports that France and Germany are taking steps to resolve the region’s debt crisis and as investors awaited the minutes the Bank of England’s latest policy meeting.

Sterling snapped a two-day decline versus the greenback as U.K. stocks gained after the Guardian newspaper said Germany and France agreed to boost the region’s rescue fund. A person with direct knowledge told Bloomberg News no deal has been reached. The Bank of England minutes, showing how policy makers voted this month, will be published at 9:30 a.m. in London.

“The market’s going to be focusing on the minutes and particularly the vote,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The pound looks at the vote and often views it as a gauge of dovishness. The currency will find it difficult to hold its best levels against the dollar this morning. Those minutes will be dovish.”

Sterling strengthened 0.2 percent to $1.5738 at 9:23 a.m. London time, and advanced 0.1 percent to 120.88 yen. The pound weakened 0.2 percent to 87.74 pence per euro.

The FTSE 100 Index climbed 0.5 percent and the Stoxx Europe 600 Index gained 0.2 percent.

The pound has slid 1.6 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which measure a basket of 10 developed-market currencies.

The Bank of England announced an extension of its bond- purchase program to 275 billion pounds from 200 billion pounds on Oct. 6.

The 10-year gilt yield rose six basis points, or 0.06 percentage point, to 2.49 percent. The 3.75 percent security maturing September 2021 fell 0.550, or 5.50 pounds per 1,000- pound face amount, to 110.945.

U.K. government debt has returned 12 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, surpassing the 7.1 percent return for German bunds and 8 percent gain for U.S. Treasuries.

--Editors: Matthew Brown, Nicholas Reynolds

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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