Nov. 11 (Bloomberg) -- Investors turned pessimistic on the pound for the first time since April on speculation that the Bank of England will keep interest rates at a record low into the second half of 2010, a survey of Bloomberg users showed.

The U.K. currency will fall and gilt yields rise over the next six months, according to respondents in the Bloomberg Professional Global Confidence Index. The 1,558 participants remained optimistic about the global economy for a fourth consecutive month.

This month the Bank of England increased the amount of bonds it will purchase to $200 billion pounds ($332 billion) under its so-called quantitative-easing program to curb borrowing costs by pumping cash into the financial system. Concern about the country’s rising debt level led Fitch Ratings to say yesterday that the U.K.’s sovereign credit rating is most at risk among top-graded nations.

“The underlying trend is still to sell QE currencies and buy higher-yielding currencies,” said Shaun Osborne, a survey participant in Toronto who is the chief currency strategist at Toronto-Dominion Bank, Canada’s second-biggest lender. “Countries like Norway and Australia are tightening, whereas the U.K. is a long way away from” raising interest rates, he said.

Bank of England policy makers will keep their main rate at 0.5 percent until the third quarter of 2010, according to the median estimate of 42 economists surveyed by Bloomberg.

Diffusion Index

Sentiment toward sterling fell to 42.96 in November, from 50.49 last month and 62.04 in September, according to the survey. The reading is the lowest level since it dropped to 41.99 in March. The measure is a diffusion index, meaning a reading below 50 indicates Bloomberg users expect the pound to weaken. It was last below 50 in April.

Survey respondents turned bearish on the pound as it rose to a three-month high of $1.6843 on Nov. 9 and an almost two- month high of 88.98 pence per euro. Sterling has appreciated 15 percent against the dollar this year. Osborne said it may weaken to $1.61 and 93 pence per euro in the next three months.

The gains may be overdone given the outlook for growth. While the index measuring prospects for an improving global economy was 60.33, compared with 61.7 in October, the index for the U.K. fell to 34.51 from 39.71, the third straight decline.

“The fiscal deterioration in the U.K. is one of the worst in the developed countries and it’s going to have a very significant negative impact on the country’s recovery prospects,” said Ian Stannard, foreign-exchange strategist in London at BNP Paribas SA. “The Fitch warning sums up our concerns in regards to sterling.”

Extending Asset Purchases

The pound fell against all 16 of its most-traded peers today as Bank of England Governor Mervyn King said a weaker currency is helping the economic recovery, and that policy makers may extend its quantitative-easing program.

“It’s not very good news for sterling,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG. “The focus is still very much on the uncertainties surrounding growth so the bank isn’t yet ready to say to the market that it’s finished with quantitative easing.”

The pound fell 0.6 percent to $1.6653 as of 3:27 p.m. in London, and 0.8 percent to 90.21 pence per euro.

“The depreciation of sterling should lead to a recovery in economic activity,” King said after the bank’s quarterly report was published today. “We have a completely open mind as to whether to do more asset purchases or not.”

Dollar Bears

The U.K. remained mired in recession in the third quarter as the U.S. expanded, and Germany and France stopped contracting in the second quarter.

Respondents stayed bearish on the dollar for an eighth month, as sentiment improved to 42.42 from 31.23 in October. U.S. users maintained a pessimistic outlook on the U.S. for the 23rd straight month, or since the survey began in Dec. 2007.

Participants in Brazil, which has the highest interest rates among the countries surveyed at 8.75 percent, have the most bullish currency outlook. The index measuring sentiment toward the real was 74, versus 76.54 in October.

South America’s biggest economy grew an annualized 7.85 percent from April through June after two quarters of contraction. Respondents said they were the most confident in the Brazilian economy since March 2008.

Japanese Bonds

Respondents said they expect yields on government bonds in every country surveyed to rise. The U.S. 10-year note index rose to 68.54 from 64.51 in October. The yield on the benchmark 10- year U.S. Treasury rose to 3.48 percent yesterday from the low this year of 2.14 percent in January.

Users in France were the most bearish on yields, with a reading of 73.91, the highest level since the survey began. The yield on the benchmark oat has increased to 3.57 percent from 3.42 percent at the start of the year.

German respondents were the second-most bearish, with the index for German bunds jumping to 70.83 from 67.74, while the index for Japanese bonds climbed to 61.07 from 46.19 in October. Japanese 10-year yields have risen to 1.44 percent from 1.25 percent on Oct. 6.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

Last Updated: November 11, 2009 10:33 EST