The pound rose, surpassing $1.60 for the first time in almost seven months, as optimism the worst of the financial crisis is over stoked demand for assets denominated in the British currency. The pound rallied versus the euro as the FTSE 350 Banks Index advanced 1.6 percent. The yen fell against higher-yielding currencies such as the Brazilian real and Australian dollar as a rebound in U.S. consumer confidence drove stocks higher. The South Korean won dropped after North Korea threatened military action and said it’s no longer bound by the 1953 armistice. “The global investor store of idle cash reserves will continue to gravitate towards the pound and away from the dollar and the yen,” Neil Jones, head of hedge-fund sales in London at Mizuho Corporate Bank Ltd., wrote in a research note today. “The pound gain has further momentum ahead.” The pound rose as high as $1.6039, the strongest level since Nov. 5, before trading at $1.6021 as of 7 a.m. in New York, from $1.5926 yesterday. It appreciated to 87.09 pence per euro, from 87.81 pence. The yen weakened to 95.22 per dollar, from 95.03 yen. Investors are betting the pound’s 19 percent decline versus the dollar in the past 12 months may have left it cheap given optimism that government stimulus packages will pull the global economy out of the recession. Almost a quarter of the 220 fund managers surveyed by Merrill Lynch & Co. in May said the U.K. currency is undervalued. ‘Gaining Ground’ “The view that sterling is gaining ground is becoming more prevalent,” said David Powell, a currency strategist at Bank of America-Merrill Lynch in London. The pound has climbed about 2.9 percent since it rose through its 200-day moving average versus the dollar on May 20, a sign to investors who use technical charts that it will extend its advance. Those gains may be poised to sputter, according to the 14- day relative strength index. The gauge was at 76.13 today, the sixth straight day it has been the 70 level that typically signals an asset is poised to fall. Demand for the safety of the yen weakened after the U.S. Conference Board said yesterday its index of U.S. consumer sentiment surged in May to 54.9, the highest level since September. An index of manufacturing in the central Atlantic region climbed to 4 this month, the Richmond Federal Reserve Bank reported. Sales of existing houses, which account for more than 90 percent of the U.S. market, rose 2 percent last month to a 4.66 million annual rate, economists forecast before the National Association of Realtors’ report today. New-home sales increased 1.1 percent to a 360,000 annual rate, a separate Bloomberg survey showed before a Commerce Department report tomorrow. Won Weakens “We are watching incoming housing data, especially if they will support renewed euphoria about the economy following the surprisingly strong consumer confidence report,” said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan’s second- largest lender. “Safe-haven currencies such as the yen and the dollar will weaken against emerging currencies.” South Korea’s won weakened for a third day versus the dollar, reversing earlier gains, after North Korea threatened military action in response to the South joining an anti- proliferation program. “A downturn in local stocks weighed on the won and those who sold dollars earlier turned to building long positions after the renewed threat from the North,” said Jo Hyun Suk, a currency dealer with Korea Exchange Bank in Seoul. The won declined to 1,269.35 per dollar, from 1,2662.88. Kiwi Declines The New Zealand dollar fell against all but one of the most-traded currencies before the nation releases its annual budget tomorrow. Standard & Poor’s lowered its outlook on New Zealand’s AA+ foreign currency credit-rating to “negative” in January, citing challenges facing the economy. “Coming into the budget, people have been staying away from the New Zealand dollar,” said Lauren Rosborough, a currency strategist at Westpac Banking Corp. in London. “But there is also a fade of the rally that we’ve seen recently.” The kiwi fell 0.7 percent to 62.03 U.S. cents, from 62.46 yesterday.

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