Oct. 22 (Bloomberg) -- The pound was near the weakest level in almost a month against the dollar amid speculation this weekend’s Group of 20 meeting in South Korea may result in an accord that will support the U.S. currency. Sterling is headed for its biggest weekly loss against the dollar since August and slid for a sixth week versus the euro, the longest stretch since November 2004, as G-20 finance ministers and central bankers began talks. The finance chiefs plan to say members will avoid “competitive undervaluation” of currencies, according to an official from a member country, citing a draft statement and speaking on condition of anonymity. The pound and dollar have both dropped versus the euro this month on concern the Bank of England and Federal Reserve will both engage in asset purchases known as quantitative easing. “Investors have had short positions on the dollar betting on further quantitative easing in the U.S., but there is a risk factor going into this weekend with the G-20,” said Lauren Rosborough, a senior strategist at Westpac Banking Corp. in London. “People are lightening their short positions by buying back U.S. dollars to reduce their risk, so that if we do get any surprises, it won’t hurt their portfolios as much.” Sterling was 0.1 percent stronger at $1.5719 at 1:49 p.m. in London, after earlier falling as much as 0.3 percent. The pound fell 0.1 percent to 88.72 pence per euro and was little changed at 127.71 yen. ‘Not a Chance’ Bank of England minutes released this week showed policy makers were leaning toward a second round of quantitative easing to boost the economic recovery, helping drive the pound to its weakest level in more than six months versus the euro. The Monetary Policy Committee split three ways as a majority voted to maintain the key interest rate at 0.5 percent and bond purchases at 200 billion pounds. Policy maker Adam Posen voted to boost QE by 50 billion pounds ($79 billion) and yesterday said the recovery in the economy appears “patchy.” Andrew Sentance was the only member who pushed for an increase in the key rate to 0.75 percent. In contrast, German Chancellor Angela Merkel said on Oct. 20 governments must find an “exit strategy” from stimulus spending, and last week Bundesbank President Axel Weber called for an immediate end of the ECB’s bond-purchase program. “Does it seem likely that the BOE is going to sound as fundamentally hawkish as the ECB anytime soon? Not a chance,” said Ray Farris, the London-based head of foreign-exchange strategy at Credit Suisse Group AG. “It’s extremely unlikely that we are going to get an innovation out of the BOE that strengthens sterling to a meaningful degree in any sustainable fashion against the euro.” Gilts Rise Ten-year gilts fell, pushing up the yield one basis point to 2.95 percent. Two-year gilts fell, with the yield rising to 0.63 percent. Chancellor of the Exchequer George Osborne on Oct. 20 also detailed his plan to almost eliminate the nation’s record 156 billion-pound budget deficit. Osborne proposes to slash 500,000 public-sector jobs, impose a levy on banks and cut spending by 81 billion pounds over five years. He aims to narrow a deficit the government forecasts at 10.1 percent of gross domestic product this year to 2.1 percent of GDP in the 2014-15 fiscal year. Debt interest costs would fall by more than 5 billion pounds by 2015. The pound has depreciated 5.8 percent this year against a basket of its developed-country peers, according to Bloomberg Correlation-Weighted Currency Indexes, making it the worst performing currency. --Editors: Keith Campbell, Mark McCord. To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Source