By Lukanyo Mnyanda and Agnes Lovasz Oct. 29 (Bloomberg) -- The pound headed for its biggest two-day advance against the dollar in more than 16 years as stocks rallied around the world and a report showed mortgage approvals rose for the first time since June 2007. The pound was also poised for a second day of gains versus the euro after the Bank of England said lenders approved 1,000 more home loans last month than in August. The benchmark FTSE 100 Index of stocks climbed more than 4 percent as equities in Europe and Asia rose. Chancellor of the Exchequer Alistair Darling will pledge extra borrowing today to support the economy as it enters its first recession since 1992. ``With equities recovering, we're seeing a correction of the sharp weakness in the pound,'' said Marcus Hettinger, a Zurich-based currency strategist at Credit Suisse Group AG. ``A lot will depend on how risk appetite develops.'' The pound rose to $1.6071 as of 10:38 a.m. in London, from $1.5901 yesterday, bringing its gain in the past two days to 3.3 percent, the most since September 1992. The U.K. currency hasn't risen for two straight days since Oct. 14. Against the euro, the pound climbed to 79.68 pence, from 79.77 pence. It dropped 0.2 percent to 155.56 yen, after surging yesterday against the Japanese currency by the most in at least 37 years. U.K. lenders approved 33,000 loans for house purchases last month, from 32,000 in August, still near the lowest since comparable data began in 1999, the Bank of England said today. The value of loans rose to 4.2 billion pounds, from 4.1 billion pounds. The number of approvals was expected to match the August figure, according to economists surveyed by Bloomberg. Rate Cuts Policy makers will probably cut their key interest rate half a percentage point to 4 percent at the next meeting on Nov. 6, according to the median estimate of 30 economists in a Bloomberg survey. The U.S. Federal Reserve will probably reduce its main rate by half a point to 1 percent today, according to a separate survey. The Bank of England lowered the main rate by a half point this month to 4.5 percent in a joint action with central banks around the globe to stem the financial crisis. The British currency had its biggest intraday decline versus the dollar in at least 37 years on Oct. 24, when a government report showed the economy contracted more than twice as much as economists predicted, probably marking the start of a recession. In the second quarter, there was no growth. Bank of England Deputy Governor John Gieve said in a speech yesterday that financial markets are under ``acute'' stress. U.K. government bonds rose, with the yield on the two-year gilt falling 6 basis points to 3.06 percent. The 4.75 percent security due June 2010 gained 0.08, or 80 pence per 1,000-pound ($1,607) face amount, to 102.63. The yield on the 10-year note dropped 2 basis points to 4.37 percent. Bond yields move inversely to prices. To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net;

Source