BLBG:U.K.’s Pound Strengthens as BOE Asset-Purchases Plan Boosts Risk Appetite Q
The pound strengthened the most in a week against the dollar amid optimism the Bank of England’s decision to reactivate its bond-purchase program may help to revive the U.K.’s faltering economy.
The pound appreciated versus all but two of its 16 major peers tracked by Bloomberg, reversing yesterday’s drop, as European and U.K. stocks advanced. BOE policy makers yesterday boosted the central bank’s quantitative-easing program by 75 billion pounds ($115 billion) to 275 billion pounds. The European Central Bank reintroduced yearlong loans for banks. The pound gained even after Moody’s Investors Service downgraded a dozen British financial institutions.
“The steps that were taken yesterday both in the U.K. and also the ECB have helped alleviate the risk aversion that’s been in the markets in regard to Europe,” said Derek Halpenny, London-based European head of currency research at Bank of Tokyo-Mitsubishi UFJ.
Sterling traded 0.6 percent stronger at $1.5544, headed for a weekly drop of 0.3 percent, at 8:57 a.m. in London. It slumped as low as $1.5272 after yesterday’s announcement, the least since July 23, 2010. The pound appreciated 0.6 percent to 86.48 pence per euro.
The Stoxx Europe 600 Index of shares climbed for a third day, rising 0.7 percent. The U.K.’s FTSE 100 Index gained 0.4 percent.
The pound has strengthened 2.5 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which measure a basket of 10 developed-market currencies.
Bank Ratings Cut
Moody’s cut the senior debt and deposit ratings of lenders including Royal Bank of Scotland Group Plc, concluding the government would be less likely to provide support for them if they became financially troubled.
U.K. government bonds slid, pushing the 10-year gilt yield two basis points higher to 2.42 percent. The two-year note yield was little changed at 0.62 percent.
Gilts have returned 12 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, surpassing the 7.3 percent gain for German bunds and 5.2 percent increase for French securities.
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.
