Pound Extends Third Weekly Gain Versus Dollar After Service Gauge Rises
The pound rose against the dollar, extending a third weekly advance, after a gauge of services activity unexpectedly climbed to a 10-month high in January.
U.K. two-year notes advanced for a second day after the Treasury sold 3.5 billion pounds ($5.55 billion) of 28-, 92- and 182-day bills. Today’s purchasing managers’ index report came after an industry group said the economy has slipped back into a recession. Bank of England policy maker Adam Posen said yesterday there’s an argument for officials to expand their asset-purchase program next week to boost the economy.
“After all the bad press and the recent think-tank suggesting recession, the U.K. services PMI pops up this morning on a storming number,” said Neil Jones, head of European hedge- fund sales at Mizuho Corporate Bank Ltd. in London. “It kicked sterling up. Also there’s a safe-haven theme as various large investors around the planet are looking for alternative places to invest surplus cash.”
The pound gained 0.1 percent to $1.5823 at 1:02 p.m. London time, extending this week’s advance to 0.6 percent. Sterling was little changed at 83.15 pence per euro, having appreciated 1.1 percent over the past five days.
U.K. gross domestic product will fall 0.2 percent this quarter after declining by the same amount in the three months through December, and the economy will grow less than previously forecast over the next two years, the National Institute for Economic and Social Research said.
The two-year gilt yield fell two basis points to 0.36 percent. The 2.25 percent note due March 2014 rose 0.025, or 25 pence per 1,000 pound face amount, to 103.915. The 10-year gilt yield dropped one basis point to 2.08 percent.
Investors bid for 2.51 times the amount of 92-day securities on offer at today’s auction, compared with a bid-to- cover ratio of 2.52 in a sale of 91-day securities on Jan. 27. Demand for the 182-day bills rose to 3.49 times, from a bid-to- cover ratio of 2.76 at a Jan. 27 offering. The average yield of both securities increased from their previous sales.
Gilts have handed investors a loss of 0.7 percent this year, while German government bonds fell 0.1 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
The pound has weakened 0.7 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar declined 2.6 percent, and the euro slid 1 percent.
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