By Lukanyo Mnyanda June 11 (Bloomberg) -- The pound reached its highest level in more than a week against the dollar before a report economists say will show producer prices rose last month, adding to evidence the U.K.’s recovery is gathering pace. Sterling headed for its first weekly gain since April. The cost of goods at factory gates rose 5.8 percent from a year earlier, the most since October 2008, the Office for National Statistics will say today according to a Bloomberg survey. The two-year gilt yield was within three basis points of the highest in a week as rising stocks sapped demand for the safest assets. “In the long run, sterling is still undervalued,” said Niels Christensen, a foreign-exchange strategist at Nordea Bank AB in Copenhagen. The pound “is a bit of a cyclical currency and it is well supported when we have risk appetite.” The pound was little changed at $1.4715 as of 8:45 a.m. in London, after earlier climbing to $1.4759, the most since June 2. Sterling was at 82.4 pence per euro, set for a third week of advances versus the 16-nation currency. The yield on the two-year gilt was at 0.86 percent while that on the 10-year security fell one basis point to 3.54 percent. The two-year yield rose to 0.89 percent yesterday, the most since June 4. The FTSE 100 Index of shares climbed 0.1 percent. --Editors: David Clarke, Peter Branton. To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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