The pound rose for a 10th day against the dollar, the longest winning streak since June 1992, as investors sought the relative safety of U.K. currency after Standard & Poor’s cut Spain’s credit rating.
Sterling climbed to the strongest in almost 22 months against the euro as signs the region’s debt crisis is worsening damped demand for European assets. The Bank of Japan (8301) today expanded its asset-purchase program, while the U.S. and Swiss central banks have also signaled they are prepared to take further stimulus measures. Gilts fell as the U.K. auctioned 3 billion pounds ($4.87 billion) of bills.
The pound is being favored because the central banks of Japan, Switzerland and the U.S. are “chasing away inflows into their currencies,” said Jane Foley, a senior currency strategist at Rabobank International. “There are clearly still tensions in the euro zone, with the overnight S&P downgrade.”
The U.K. currency rose 0.3 percent to $1.6240 at 4:54 p.m. London time after climbing to $1.6258, the highest since Sept. 1. The pound appreciated 0.1 percent to 81.59 pence per euro. It reached 81.34 pence, the strongest since June 2010.
S&P lowered Spain’s long-term credit rating by two steps yesterday to BBB+ from A, with a negative outlook. The downgrade increased concern the debt crisis is spreading to the region’s larger economies, even after more than $1 trillion of European Central Bank liquidity and two Greek bailouts.
Sterling has appreciated 1.6 percent in the past month, the second-best performer after the yen of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.4 percent, and the franc declined 0.6 percent.
Swiss policy makers are ready to take further measures to weaken the currency, central bank President Thomas Jordan said today in Bern. The Federal Reserve is “prepared to do more” to ensure the recovery, Chairman Ben S. Bernanke said April 25.
“You can look at sterling fundamentals and say they’re not great, but maybe I have to buy some because there’s a lack of choice,” Foley said.
The pound is testing above its October high versus the dollar and may face resistance at its Aug. 19 peak of $1.6618, according to data compiled by Bloomberg.
The 10-year gilt yield climbed three basis points, or 0.03 percentage point, to 2.13 percent. The 4 percent bond due in March 2022 dropped 0.28, or 2.80 pounds per 1,000-pound face amount, to 116.57.
The U.K. sold 28-day bills today at a yield of 0.3761 percent, 91-day securities at 0.403 percent, and 182-day bills at 0.4374 percent.
The Debt Management Office plans to auction as much as 3.75 billion pounds of March 2019 bonds on May 1 and inflation-linked securities due March 2034 on May 3. It will sell as much as 3 billion pounds of bills on May 4.
Gilts have handed investors a loss of 1 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. U.S. Treasuries rose 0.1 percent, and German bunds gained 1.2 percent.
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