SF: Pound Stays Higher Central Bank Holds Rates, Bond Repurchases
June 10 (Bloomberg) -- The pound stayed higher against the dollar after the Bank of England kept interest rates at a record low and maintained its bond-buying program as it seeks to safeguard Britain's economic recovery.
The U.K. currency was up 0.6 percent against its U.S. counterpart and 0.5 percent versus the yen after the central bank said it held the main rate at 0.5 percent, in line with the forecasts of all 61 economists surveyed by Bloomberg News. Investors reduced bets on higher rates earlier this week after Fitch Ratings said Britain needs to accelerate budget cuts, fueling concern the economic recovery will flounder.
"There's very little chance of them hiking rates" while the government is cutting spending, Jane Foley, a London-based research director at Forex.com, an online currency trader, said before the decision. "The government has shaken the voter and faced the fact that the economy faces a drastic period of budgetary repair."
The pound strengthened to $1.4614 as of 12:01 p.m. in London, from $1.4528 yesterday. Sterling bought 133.49 yen, up from 132.66 yesterday. It was at 82.31 pence per euro, from 82.46 pence.
A separate poll predicted that the bank would hold its asset-purchase plan at 200 billion pounds ($293 billion). Policy makers paused in February, while leaving open the option to buy more as officials gauge the health of the U.K.'s recovery.
The pound has declined 2.5 percent this year, Bloomberg Correlation-Weighted Currency Indexes show.
The 10-year gilt yield fell two basis points to 3.51 percent today, while the yield on the two-year note climbed less than one basis point to 0.82 percent.
The pound gained 0.3 percent against the dollar on May 10, when the Bank of England kept its policy unchanged. The 10-year gilt yield rose nine basis points to 3.92 percent.
"Much, much more needs to be done," Moritz Kraemer, head of the sovereign ratings group for Europe, Middle East and Africa at Standard & Poor's, said in a Bloomberg Television interview on June 8. "There's a lot of work ahead, and we will continue to monitor the situation closely."
