Pound Climbs to 15-Month High Versus Euro as French Borrowing Costs Rise
Jan. 5 (Bloomberg) -- Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank AG, talks about the outlook for global currencies in 2012. Ruskin speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The pound reached its highest level in 15 months against the euro as debt-crisis concern deepened after French borrowing costs increased at the country’s first bond auction of the year.
The pound also rose against the Swiss franc and the Danish krone. France sold bonds maturing in 2021 at a yield of 3.29 percent, up from 3.18 percent last month. Greek Prime Minister Lucas Papademos said his country faces “the immediate risk” of a default in March if the European Union, International Monetary Fund and European Central Bank fail to agree the nation’s next loan. Sterling extended a drop against the dollar, falling to the lowest level in a week, after reports showed U.S. employment is gaining momentum into 2012.
“Relative to the euro zone, we feel that both the pound and the gilt market have the upper hand,” Standard Bank Plc analysts including Steven Barrow wrote in an e-mailed research note today. “For the pound, we target a move to 0.75 for euro- sterling this year. We would certainly not rule out a bigger rise if the euro-zone crisis escalates significantly.”
The pound strengthened 0.3 percent to 82.60 pence per euro at 4:12 p.m. London time after reaching 82.55 pence, the strongest since Sept. 13, 2010. Sterling fell 0.9 percent to $1.5482 after declining to $1.5468, the weakest since Dec. 30. The currency dropped 0.3 percent to 119.49 yen.
Ten-year gilt (GUKG10) yields were little changed at 2.05 percent. The 3.75 percent bond due September 2021 traded at 114.85. Two- year yields were also little changed, at 0.41 percent. They fell to a record low 0.271 percent on Dec. 30.
U.S. Jobs Data
Sterling has risen 2.9 percent against a basket of nine developed-market peers in the past six months, making it the third-best performer after the Japanese yen and the U.S. dollar, according to Bloomberg Correlation-Weighted Indexes.
Applications for jobless benefits in the U.S. decreased 15,000 in the week ended Dec. 31 to 372,000, according to Labor Department figures today. A separate report from ADP Employer Services showed companies added 325,000 workers in December, more than the 178,000 increase forecast by economists in a Bloomberg survey, and the most since the series began in January 2001.
Economists forecast a Labor Department report tomorrow will show hiring picked up and joblessness held below 9 percent in December.
U.K. government bonds today underperformed their German counterparts, the benchmark for the euro-area debt markets. The yield spread between 10-year gilts and German bunds widened to 20 basis points, the most on a closing basis since Nov. 22.
French Auction
U.K. government bonds also fell as a report showed services industries (PMITSUK) in Britain expanded at the fastest pace in five months in December. A gauge of U.K. services activity based on the survey of purchasing managers rose to 54 from 52.1 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London.
France sold 7.96 billion euros of bonds. The securities due 2021 attracted bids for 1.6 times the amount on offer, compared with 3.1 times in the previous sale on Dec. 1. The country also sold debt maturing in 2023, 2035 and 2041.
Gilts outperformed French bonds so far this year, handing investors a 0.5 percent loss compared with a decline of 1.3 percent from the Gallic debt, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
The pound rose 0.2 percent to 1.4743 francs. Swiss National Bank Chairman Philipp Hildebrand said he plans to stay at the helm of the central bank and that he didn’t abuse his position after a currency transaction by his wife.
The pound has gained 1.1 percent against the franc this year and 3.2 percent in the past three months.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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