The pound fell against the dollar and the euro after the Bank of England started buying U.K. government bonds and stock-market losses sapped demand for riskier assets priced in the British currency. The U.K. currency also declined versus the Japanese yen. The central bank bought 2 billion pounds ($2.8 billion) of gilts yesterday by creating money as part of a quantitative-easing policy. The FTSE 100 Index of U.K. shares fell 1 percent, and the Dow Jones Stoxx 600 Index of European shares slipped 1.2 percent. “Sterling is quite interest-rate sensitive, and quantitative easing has pushed down longer yields, pushing gilts yields down to near parity with bunds,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. “We have further risk aversion this morning with European shares down, which is also pound negative.” The pound weakened 1 percent to $1.3737 by 9 a.m. in London. It depreciated 2.4 percent to 132.46 yen and 0.5 percent to 92.97 pence per euro. U.K. government bonds rose, pushing the yield on the benchmark 10-year gilt down seven basis points to 3.02 percent. The 4.5 percent security due March 2019 rose 0.64 or 6.4 pounds per 1,000-pound face amount, to 112.68. The two-year gilt yield fell six basis points. Bond yields move inversely to prices.

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