By Matthew Brown Dec. 8 (Bloomberg) -- The pound rose the most against the dollar in more than five weeks as gains in stock markets around the world eroded appetite for the U.S. currency as a haven. The pound climbed, along with the Australian and New Zealand dollars and the Swedish krone, as equities in Europe and Asia rallied after U.S. President-elect Barack Obama pledged the largest infrastructure-spending package since the 1950s to stimulate economic growth. U.K. government bonds declined as investors switched to higher-yielding assets. “We’ve seen more risky trades being put on, strengthening the pound, the aussie and the kiwi,” said Lee Ferridge, a senior macro strategist in London at State Street Bank & Trust Co. “The dollar has suffered on that because it has previously benefited from repatriation and safe-haven flows.” The pound strengthened as much as 2.5 percent to $1.5047, the biggest intraday gain since Oct. 29, and was at $1.4857 as of 12:51 p.m. in London. It appreciated 0.1 percent to 86.52 pence versus the euro, advancing for a second day. Investors should buy the Australian and New Zealand dollars versus the pound through the rest of the year, Ferridge said. Thereafter he favors the dollar. If the pound rises to between $1.53 and $1.55, he recommends selling it. The MSCI World Index of stocks climbed 2.6 percent and the U.K. benchmark FTSE 100 Index gained 4.8 percent. Producer Prices The pound stayed higher against the dollar and the euro after a government report released showed British factories cut prices for a fourth month in November. Producer prices fell 0.7 percent, after declining 1 percent in October, the Office for National Statistics said today. The drop matched the median estimate of 21 economists surveyed by Bloomberg. The pound fell to a record against the euro last week after the Bank of England cut its benchmark interest rate to the lowest level since 1951 in an effort to keep Europe’s second-largest economy from falling deeper into a recession. The pound’s decline against the euro has been “overdone,” said Antje Praefcke, a currency strategist with Commerzbank AG in Frankfurt. The pound will strengthen to around 85 pence per euro by the end of the year, she said. Gilts declined, sending the yield on the 10-year bond higher by 16 basis points, the most since Oct. 13, to 3.58 percent. The 5 percent security due March 2018 slipped 1.32, or 13.2 pounds per 1,000-pound ($1,491) face amount, to 111.12. The yield on the two- year gilt climbed 17 basis points to 2.01 percent. Yields move inversely to bond prices. ‘A Steal’ The difference, or spread, between the yield on U.S. 10-year Treasuries and similar-maturity gilts widened to 79 basis points today from 71 basis points at the end of last week. It reached a low of 23 basis points Nov. 13. U.K. bond yields at 3.4 percent “seem like a steal on the basis of our forecasts,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, wrote in a report to clients today. The Bank of England reduced its benchmark interest rate 1 percentage point to 2 percent on Dec. 4, the lowest since 1951, as it aims to stimulate bank lending and steer the economy out of its first recession in 17 years. To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net

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