BLBG: U.K. Pound Declines Against Dollar, Euro as Stock Market Falls
The pound dropped against the dollar and the euro as stock markets declined and central bank Governor Mervyn King said the U.K. economic recovery will be slow.
The British currency also fell versus the Swiss franc and the Australian dollar as the FTSE 100 Index of U.K. shares slipped as much as 1.1 percent. The U.K.’s path out of recession may be a “long, hard slog,” the Bank of England’s King told lawmakers in London late yesterday.
“The market’s positioned long sterling and lower equities provide a good excuse to take some profit,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The pound hasn’t performed since Mervyn King spoke yesterday.”
The pound fell 0.8 percent to $1.6265 as of 12:35 p.m. in London, and weakened 0.9 percent to 85.69 pence per euro. The British currency fell 0.7 percent to 1.7882 Swiss francs and dropped 0.8 percent to 2.0419 Australian dollars.
Sterling advanced yesterday after the Organization for Economic Cooperation and Development raised its forecast for U.K. growth next year. The British economy will recover “mildly” compared with a previous projection of a 0.2 percent contraction, the Paris-based group said.
The pound has risen more than 11 percent against the dollar this year, rebounding from a 26 percent decline in 2008.
U.K. two-year gilts advanced, pushing the yield down two basis points to 1.13 percent. The 4.25 percent security due March 2011 climbed 0.03, or 30 pence per 1,000-pound ($1,364) face amount, to 105.22.
The 10-year gilt yield climbed one basis points, or 0.01 percentage point, to 3.71 percent. Bond yields move inversely to prices.
Gilts have returned 0.7 percent this month, compared with a 0.6 percent gain for German bonds and a 0.9 percent loss for U.S. Treasuries, according to Merrill Lynch & Co.’s U.K. Gilts, German Federal Governments and U.S. Treasury Master indexes.
