The pound fell to a record low against the yen for a second day and the weakest since 2001 versus the dollar after the Bank of England said it may start buying assets to revive the economy. The British currency also dropped a fourth day against the euro, its longest sequence of declines this year, after central bank Governor Mervyn King said he’s not opposed to sterling’s weakness as the lowest interest rates since 1694 fail to prevent the economy from shrinking. The yen rose a third day against the Australian dollar as investors sold higher-yielding assets. “The speech hurt the currency as it was more explicit than we expected,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. “The central bank is turning on the printing presses.” The pound fell to 123.74 yen as of 6:27 a.m. in New York from 125.01 yen yesterday. It reached an all-time low of 122.99 yen. The currency declined to $1.3761, from $1.3928, and traded at $1.3716, the lowest level since June 2001. Against the euro, the pound depreciated to 93.81 pence, from 92.62 pence, after breaching 94 pence for the first time since Jan. 5. The euro was at $1.2907, from $1.2904. Since the middle of last year, “the exchange rate has fallen by almost 20 percent, and oil prices have fallen by around two-thirds, both of which will boost demand,” King said yesterday in Nottingham, England. Britain’s currency may extend losses versus the dollar as signs the global economic slowdown is deepening prompt investors to buy safer assets, Yu said, without giving a specific forecast. Bank of Tokyo-Mitsubishi UFJ Ltd. said in a note today the pound may fall to $1.30 “sooner rather than later.” ‘One Line’ “We expect the pound to weaken further against the dollar,” said Derek Halpenny, European head of global currency research in London at Bank of Tokyo. “Governor King afforded the collapse of the pound one line in his speech last night, and it was highlighting the positive aspect of pound weakness.” The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to a Bloomberg News survey of economists. Policy makers voted 8-1 to reduce the rate by 50 basis points to 1.5 percent at the Jan. 8 meeting, bank minutes showed today. David Blanchflower voted for a for a full-point cut. The yen rose to 58.24 against Australia’s dollar, from 58.42. Stock markets fell around Europe, with Germany’s DAX Index losing 1.5 percent and France’s CAC 40 Index sliding 2.2 percent. Japan’s Nikkei 225 Stock Average fell as much as 2.9 percent to the lowest level since Nov. 21. Increased Risk Aversion “The market is reflecting the downside risk of the global economy and an increase in risk aversion by investors,” said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital. “The yen carry trade is being unwound and the yen is the beneficiary. This move will continue for a long time.” The yen may strengthen to 84 yen against the dollar and 105 per euro in three months, Umemoto forecast. It was at 89.89 to the U.S. currency today, from 89.76. Japan’s currency also advanced for a third day against the pound as a U.K. report showed unemployment climbed in December at the second-fastest pace since 1991. The yen’s gains versus the dollar were tempered after U.S. Treasury Secretary-nominee Timothy Geithner urged Congress to pass a stimulus plan with “sufficient strength” to revive the economy. Japan’s currency also ended a two-day winning streak versus the euro after a technical chart signaled its 9.1 percent advance this month was excessive. “The yen looks overbought,” said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. “There’s a bit of unwinding in long positions,” he said. Long positions are bets on a rise in an asset price. The euro’s 14-day stochastic oscillator versus the yen was 8.4, according to data compiled by Bloomberg. A level below 20 suggests a currency may have weakened too quickly and is poised to rebound.

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