BLBG:Pound Is Little Changed Versus Dollar as U.K. House Prices Fall
The pound was little changed against the dollar and approached its weakest level in six months versus the euro as a report showed U.K. house prices fell for a sixth month in December.
Sterling earlier dropped to the lowest level in more than a week versus the U.S. currency. Home prices in England and Wales slipped 0.1 percent, the same as in November, Hometrack Ltd. said in an e-mailed statement today. Values are forecast to fall 1 percent next year after a 0.3 percent decline in 2012, the London-based property research group said. Ten-year gilts snapped a two-day advance.
“We focus on what is rare and unique in order to explain what currencies will do well, and our view is that growth is rare in this environment,” said Ned Rumpeltin, head of Group of 10 currency strategy at Standard Chartered Plc in London. “We expect the U.K. economy to turn the corner but remain weak relative to the U.S. It is likely to underperform the dollar.”
The pound traded at $1.6195 as of 11:07 a.m. London time, after falling to $1.6143, the lowest since Dec. 14. Sterling was at 81.66 pence per euro, after depreciating to 81.68 pence on Dec. 19, the weakest level since June 11.
The pound has gained 1.5 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro declined 0.9 percent and the dollar fell 3 percent.
Gilt Yields
The 10-year gilt yield rose one basis point, or 0.01 percentage point, to 1.89 percent. The 1.75 percent bond due in September 2022 fell 0.085, or 85 pence per 1,000-pound face amount, to 98.725. The rate dropped as much as seven basis points on Dec. 21, the biggest decline since Nov. 28. The yield on two-year gilts also added one basis point, to 0.34 percent.
“The housing data today may be weak, but there is a view in the market that there could be an upside surprise in growth in coming months and the low gilt yields don’t reflect that view,” said Stuart Thomson, who helps oversee about $120 billion at Ignis Asset Management in Glasgow, Scotland. “The justification for any weakness in gilts is the growing belief that the first-half of the year will be stronger than the current consensus.”
The gilt market is scheduled to close at 12:15 p.m. in London and will resume trading on Dec. 27.
Gilts returned 2.2 percent this year through Dec. 21, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 4 percent and Treasuries earned 2 percent.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
