Pound Gains Versus Dollar, Yen as G-20 Pledges Strong Response

The pound rose for the first time in three days against the dollar after the Group of 20 pledged to make a “strong” response to challenges facing the global economy, damping demand for the safety of the U.S. currency.

Sterling also strengthened from near a record low versus the yen as optimism central banks around the world will act to counter the sovereign-debt crisis boosted European and U.S. stocks. The pound still completed a fifth week of losses versus the greenback, the longest losing streak in a year. Ten-year gilts fell, paring a weekly gain.

“The G-20 statement offered some relief for the pound,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “Sterling gets knocked around by dollar demand. Clearly the G-20 eased tensions a bit and demand for dollars has eased. Consequently, the pound has traded higher.”

The pound advanced 0.9 percent to $1.5485 at 4:33 p.m. in London, trimming this week’s decline to 1.9 percent this week. The U.K. currency appreciated 0.9 percent to 118.08 yen, after falling to an all-time low of 116.84 yesterday. Sterling strengthened 0.4 percent to 87.40 pence per euro.

The G-20 nations are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy,” finance chiefs said in a statement released after talks in Washington.

Mortgage Approvals

U.K. mortgage approvals rose to their highest level in 15 months in August, according to a report today from the British Bankers’ Association. Lenders granted 35,226 loans to buy homes, up from a revised 33,734 in July, the BBA said. Approvals were up 14 percent from a year earlier.

The Stoxx Europe 600 Index gained 0.6 percent and the FTSE 100 Index rose 0.5 percent.

The pound has gained 0.8 percent in the past three months, according to Bloomberg Correlation-Weighted Currency Indexes, which track the foreign-exchange of 10 developed nations. Only the dollar and yen have risen more.

The pound declined against the dollar this week amid concern global economic growth is slowing. The Federal Reserve said on Sept. 21 there were “significant downside risks” in the U.S. economy. The International Monetary Fund cut its 2011 and 2012 U.K. economic growth forecasts this week to 1.1 percent and 1.6 percent, from earlier predictions of 1.5 percent and 2.3 percent respectively.

The 10-year gilt yield climbed six basis points today to 2.37 percent. That’s down 11 basis points from the end of last week. The two-year yield was little changed at 0.54 percent, after dropping to a record 0.477 percent yesterday, the lowest since Bloomberg began collecting data on the securities in 1992.

Gilts have returned 9.5 percent since the end of June, and 11 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt has gained 9 percent in 2011, and Treasuries have returned 10 percent, the indexes show.

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