Pound Posts Biggest Gain Since January Against Euro on Greece Debt Crisis

The pound had its biggest weekly gain since January against the euro as European leaders struggled to contain the region’s debt crisis and keep Greece inside the monetary union, boosting demand for U.K. assets.

Sterling also gained for the first week in four against the Swiss franc. The currency climbed as investors bought U.K. assets as a haven from their European counterparts after Greek Prime Minister George Papandreou called and then scrapped a referendum on the nation’s latest bailout package, before a confidence vote in parliament that was due late yesterday. Ten- year gilt yields fell by the most since July.

“I remain positive on sterling,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “It looks very quiet, very calm. Sterling looks great value against the euro.”

The pound gained 2.2 percent in the past week to 85.83 pence per euro at 4.35 p.m. London time yesterday. That’s the biggest increase since the five days though Jan. 7, when it strengthened by 3.2 percent. Sterling also gained 2.2 percent, to 1.4234 Swiss francs. It weakened 0.7 percent to $1.6024.

Sterling gained 1.8 percent in the week, according to Bloomberg Correlation-Weighted Indexes, which track the currencies of 10 developed nations. The dollar rose 3 percent and the euro advanced 0.2 percent in the period.

BOE Rates Decision

Britain’s currency may extend gains versus the euro on speculation the Bank of England will keep its benchmark interest rate unchanged at its policy meeting on Nov. 10. The European Central Bank cut its refinancing rate by 25 basis points to 1.25 percent on Nov. 3.

The U.K. 10-year gilt yield fell 29 basis points, or 0.29 percentage point, to 2.32 percent, the biggest weekly drop since March 2009. The yield dropped to 2.17 percent on Nov. 1, the least since Bloomberg started tracking the securities in 1992.

Papandreou scrapped his plan for a referendum after European Union leaders said the move may determine the nation’s euro membership. The debt crisis in Europe and the struggle to come up with a rescue plan for Greece overshadowed Group of 20 efforts to promote growth during their summit in Cannes, France.

U.K. government bonds have returned 13 percent this year through Nov. 3, indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies show. German bunds rose 7.7 percent and Greek bonds plunged by 50 percent.

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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