The pound fell against the dollar after a survey showed home sales in the U.K. dropped to the lowest level since at least 1978 as the recession deepened. Britain’s currency also weakened versus the yen and the Swiss franc as European stock losses sapped demand for riskier assets. Former Bank of England policy maker Sushil Wadhwani said today the failure of authorities to curb an asset boom has left the economy facing a possible depression. “The decline in stocks and housing sales put some pressure on sterling following its recent rally,” said Ian Stannard, a currency strategist in London at BNP Paribas SA. “But the pullback might be temporary as we’ve seen some improvement in leading indicators. From that perspective, we could start to see some signs of stabilization building in the months ahead.” The pound fell to $1.4802 by 12:01 p.m. in London, from $1.4898 yesterday. Against the euro, it weakened to 87.62 pence, from 87.28 pence. One pound bought 134.85 yen compared with 136.14 yen yesterday. The pound’s trade-weighted index, a gauge of its performance against principal trading partners, fell to 76.32, from 76.45 yesterday, leaving it 7.3 percent higher this year. Morgan Stanley said yesterday investors should end pound short positions, or bets it will decline, because the currency is “close to fair value.” Home Sales The average number of transactions in a survey of real- estate agents and surveyors dropped to 9.9 per respondent, the lowest since the data began three decades ago, the Royal Institution of Chartered Surveyors said today. A separate report showed the slowest annual increase in retail sales since 1995 in January. The pound stayed lower as a government report showed the nation’s trade deficit shrank in December to the smallest in 18 months as its weakness boosted exports to countries outside the European Union. It fell 23 percent against the euro in 2008 and 26 percent versus the dollar. Policy makers cut the key interest rate to a record low of 1 percent on Feb. 5. They should bring the benchmark rate down to zero, according to Willem Buiter, a former member of the central bank’s rate-setting panel. “Things are awful,” Buiter said in London today. “This is a globally coordinated slump. Bank rates should be at zero and should have been there for a while.” Rising Supply The U.K. economic slump will force the government to raise gilt issuance in the fiscal year starting in April by 37 percent to a record 200 billion pounds ($297 billion) to counter dwindling tax receipts, according to HSBC Holdings Plc. Gilts advanced after the Debt Management Office sold 3.25 billion pounds of a 4.50 percent notes due 2019. The sale drew bids 1.75 times the amount of securities offered, compared with an average of 1.99 times in the previous two auctions. The gains pushed the yield on the two-year note four basis points lower to 1.62 percent. The 4.25 percent security maturing in March 2011 rose 0.08, or 80 pence per 1,000-pound face amount, to 105.32. The 10-year yield declined four basis points to 3.92 percent. U.K. government debt sales in the next fiscal year will reach 150 billion pounds, said Andre de Silva, global deputy head of fixed-income strategy at HSBC in London. Britain is selling 146.4 billion pounds of securities this year, also a record. The International Monetary Fund said on Jan. 28 the U.K. economy will contract 2.8 percent this year, the most among the Group of Seven nations, and compared with a November forecast for a 1.3 percent decline. Chancellor of the Exchequer Alistair Darling said in his pre-budget report in November the economy will shrink as much as 1.25 percent this year in the first recession since 1991. The government’s “underlying growth forecast in the report is too optimistic,” de Silva said in an interview. “The heavy issuance burden is not unique to the U.K., but also globally. The deterioration in the economic conditions here will translate into higher financing needs.”

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