The pound advanced against the dollar, euro and yen as an index of U.K. manufacturing activity climbed to its highest in eight months. The pound added to its April gain against the dollar, its biggest monthly advance in three years, after the Bank of England said U.K. mortgage approvals rose to a 10-month high in March. A gauge based on a survey of factories climbed to 42.9, from a revised 39.5 the previous month. Economists predicted 40, according to the median of 29 estimates in a Bloomberg News survey. “The PMI in U.K. is giving a fairly positive reading and this is helping sterling,” said Ian Stannard, a senior equity strategist in London at BNP Paribas SA. “It will remain relatively well supported as long as optimism in financial markets is maintained, which I think will be the case.” The pound rallied to $1.4916 as of 12:27 p.m. in London, from $1.4790 yesterday, and strengthened to 89.09 pence per euro, from 89.43. It climbed to 148.13 yen, from 145.89. U.K. gilts rose, with the 10-year security headed for the first weekly gain in three, as stocks declined and concern increased that the spread of swine flu will delay the nation’s economic recovery. The two-year note yield fell to its lowest level in four months. “With swine flu, it’s a dangerous game to play being heavily short on gilts over the weekend,” said Jason Simpson, a U.K. interest-rate strategist in London at Royal Bank of Scotland Group Plc. The gains drove the two-year gilt yield down four basis points to 1 percent, leaving it 22 basis points lower in the week. The 4.25 percent security due March 2011 rose 0.04, or 40 pence per 1,000-pound ($1,489) face amount, to 105.90. The 10-year gilt yield fell two basis points to 3.48 percent, leaving it little changed over the week. Bond yields move inversely to prices.

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