BLBG: Pound Rises; Soros Says No Longer Betting Against U.K. Currency
The pound rose for a third day against the dollar and climbed versus the euro as bank shares jumped and Citigroup Inc. advised clients to buy Lloyds Banking Group Plc, easing concern about how much government help will be required.
The British currency advanced to its highest level against the dollar in more than a week as the FTSE 350 Banks Index, a benchmark for lenders, gained 12 percent. The prospect of further U.K. bank nationalizations is “exaggerated,” Citigroup said. Billionaire investor George Soros, who made $1 billion selling the pound in 1992, said today he is no longer betting against the currency.
“The pound is moving alongside U.K. bank share prices,” said Chris Furness, the head of foreign-exchange strategy in London at 4Cast Ltd., a research company that counts central banks among its subscribers. “We’ve probably seen the low against the euro.”
The pound climbed 1.2 percent to $1.4305 by 12:36 p.m. in London, after earlier reaching $1.4330, the highest level since Jan. 20. Against the euro, the currency advanced 0.2 percent to 92.98 pence, strengthening for a second day.
Sterling pared its advance against the euro after Prime Minister Gordon Brown said the U.K. is entering a “deep recession” and the government will act to soften the effect, suggesting he may be considering a further fiscal stimulus.
Bank Shares
Barclays Plc said two days ago it won’t need further capital increases because revenue increased last year. It surged 20 percent in London trading today, more than doubling in value this week. Lloyds Banking, Britain’s biggest mortgage lender, rose as much as 46 percent, the most in at least two decades. Citigroup analysts including Tom Rayner in London raised the stock to “buy” from “hold.”
The FTSE 350 Banks Index slumped 15 percent last week as investors speculated lenders, including Lloyds Banking, will need to take more writedowns and the government may have to nationalize one or more of them.
“I did actually foresee the fall in sterling and that was one of the positions we carried,” Soros told reporters at the World Economic Forum in Davos, Switzerland. Below $1.40 “it seemed to me the risk-reward was no longer clear.”
The U.K. currency dropped below $1.40 this month for the first time since July 2001.
Ten-year government notes gained, pushing the yield eight basis points lower to 3.59 percent. The two-year gilt yield fell nine basis points to 1.40 percent. Yields move inversely to bond prices.
