The pound gained versus the dollar as demand for sterling over the relative safety of the U.S. currency rose on confidence an agreement to bail out Ireland’s banks will prevent contagion in European financial markets. The U.K. currency reversed an earlier decline against the euro. Ireland yesterday applied for aid from the European Union and the International Monetary Fund to help fund itself and save its banks, becoming the second euro member to seek a rescue. The U.K. and Sweden may contribute bilateral loans. European equities traded higher and U.S. stock-index futures advanced. “Sterling came under some pressure last week because of the problems in Ireland, but now that there’s seen to a be solution in place, sterling is going to get some benefit,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. The pound rose 0.5 percent to $1.6052 at 9:53 a.m. in London. It traded at 85.60 pence against the euro from 85.56 on Nov. 19. It declined 0.7 percent against the 16-member common currency last week. Stannard expects the pound to appreciate toward $1.61 today as optimism grows an Irish deal will limit the risk to U.K. financial institutions. British banks have the world’s largest quantity of Irish assets, totaling more than $222 billion at the end of the first quarter, according to the Bank for International Settlements. The yield on U.K. 10-year government bonds was near the highest since July 29, according to Bloomberg generic data, at 3.36 percent. The yield on the two-year note was at 1.05 percent. Gilts have returned 6.4 percent this year, compared with a 6.9 percent gain for German bonds and a 7.4 percent increase for U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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