The pound rose versus the dollar, paring a weekly decline, as a report showed a gauge of U.K. house prices climbed to a record last month, adding to signs the economy is recovering. Sterling was about 0.1 percent from a five-week low against the euro as a report said showed U.K. construction output rose in the 12 months through August. The pound gained versus the greenback on optimism U.S. lawmakers will reach an agreement on raising the nation’s debt limit to avoid a default. The Bank of England yesterday kept its benchmark interest rate at a record-low 0.5 percent and maintained its bond-buying target at 375 billion pounds ($600 billion). Gilts advanced. “The house price data and some positive developments on the U.S. debt ceiling helped to support the pound today,� said Eimear Daly, head of market analysis at Monex Europe Ltd. in London. “Further gains for sterling may be limited because expectations for robust economic recovery are not consistent with the real fundamentals. The U.K. has a structural weakness.� The pound rose 0.1 percent to $1.5985 at 9:35 a.m. London time after falling to $1.5914 yesterday, the lowest since Sept. 18. It has lost 0.2 percent versus the U.S. currency this week. Sterling slipped 0.2 percent to 84.83 pence per euro after depreciating to 84.93 pence yesterday, the weakest level since Sept. 2. U.K. home values increased 0.5 percent from August to an average 235,534 pounds, London-based real-estate researcher Acadametrics and LSL Property Services Plc (LSL) said. BOE Policy The Bank of England’s Monetary Policy Committee, led by Governor Mark Carney, said in August it would keep interest rates low until unemployment, currently at 7.7 percent, falls below 7 percent. U.K. construction was 4 percent higher than a year earlier, the Office for National Statistics said. The median estimate of economists in a Bloomberg News survey was a 3.9 percent increase. House prices were driven partly by Prime Minister David Cameron’s Help-to-Buy plan aimed at aiding first time buyers as it gives people a chance to buy a home with a down payment of as little as 5 percent of the home value. The plan has heightened criticism it may fuel a bubble in Britain. Two thirds of 31 economists in a Bloomberg News survey published today described the measure as “bad.� While the government and the Bank of England say the property market is recovering from very low levels of activity, house-price growth is outpacing inflation and incomes, raising questions over how much support is needed. Currency Indexes Sterling gained 0.2 percent in the past week, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar rose 0.3 percent, while the euro strengthened 0.4 percent. The pound was also underpinned as Westpac Banking Corp. (WBC) agreed to buy Lloyds Banking Group Plc (LLOY)’s Australian assets. Tighter capital rules following the 2008 financial crisis prompt European and U.S. lenders to retreat from the Asia-Pacific region. The transaction valued at A$1.45 billion ($1.37 billion) includes an A$8.4 billion leasing and corporate loan portfolio, Sydney-based Westpac, Australia’s second-largest lender by market value, said. The 10-year gilt yield dropped two basis points, or 0.02 percentage point, to 2.73 percent. The 2.25 percent bond due in September 2013 rose 0.135, or 1.35 pounds per 1,000-pound face amount, to 95.83. The Debt Management Office announced today that Credit Suisse Group AG, JPMorgan Chase & Co., Royal Bank of Scotland Group Plc and Societe Generale SA will lead a sale of gilts due in 2068. The offering will take place in the week starting Oct. 21, the debt office said. Gilts lost 3.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 2 percent and U.S. Treasuries declined 2.6 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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