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U.K. Pound Advances Versus Dollar After Treasuries Sales

Dec. 29 (Bloomberg) -- The pound rose against the dollar for the first day in three as a poorly received U.S. Treasury auction yesterday damped demand for the U.S. currency.

Sterling rebounded after nearing its lowest level in almost four months against the dollar. It was little changed against the euro. Treasuries fell yesterday after the $35 billion five-year sale. Bids totaled 2.61 times the available amount, the least since June.

“The main thing in the last 24 hours is the bad U.S. auction yesterday, so the dollar is mildly softer,” said Geoff Kendrick, head of European foreign-exchange strategy at Nomura Holdings in London. Kendrick and others, including Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., said there’s thin trading on markets this week and all moves should be viewed in that context.

The pound rose against the dollar, climbing 0.6 percent to $1.5459 as of 5:10 p.m. in London. That was its first advance in three days, after it fell to $1.5345 yesterday, its weakest level since Sept. 7.

Against the euro the British currency strengthened 0.1 percent to 85.26 pence.

The pound has fallen 3.1 percent in the past month and 6.9 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has dropped 2.2 percent this year, while the euro has lost 11 percent, the indexes show.

“People are not viewing the U.K.’s recovery with the same amount of confidence as previously envisaged,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London.

U.K. Unemployment

U.K. unemployment will rise in 2011 in what will be a “worse” year for hiring as the government cuts public jobs to reduce the budget deficit, the Chartered Institute of Personnel and Development said.

Payrolls will drop by 200,000 next year, with public-sector employment falling by 120,000 and private-sector jobs by 80,000, the London-based group said in a report today. Unemployment may rise to 9 percent, it added.

“It will be a ‘fingers-crossed’ year for the economy,” CIPD Chief Economic Adviser John Philpott said in the report.

The U.K. economy will grow 1.9 percent in 2011, after expanding 1.8 percent this year, according to a Bloomberg survey of 24 analysts. That compares to a forecast of 2.6 percent growth for the U.S. economy next year, a separate survey showed.

The U.K. Debt Management Office plans to sell 2.75 billion pounds of 3.75 percent bonds maturing in September 2020 on Jan. 6, the agency said in a statement.

The 10-year gilt yield advanced to the highest level in more than a week, adding five basis points to 3.56 percent. It reached 3.65 percent on Dec. 16, the highest since May 20. The 4.75 percent security maturing in March 2020 fell 0.42, or 4.2 pounds per 1,000-pound face amount, to 109.22. The two-year note yield was one basis point higher at 1.24 percent.

Gilts returned 6.6 percent this year, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Treasuries gained 5.0 percent and German debt, the euro-area’s benchmark securities, returned 6.2 percent, the EFFAS indexes show.

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net

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

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