Pound Rises Versus Dollar on U.K. Manufacturing; Gilts Advance

The pound rose for the first time in five days against the dollar after an industry report based on a survey of purchasing managers showed U.K. manufacturing expanded last month, adding to signs the economy is recovering.

Sterling climbed from near a one-month low versus the U.S. currency as separate data showed mortgage approvals increased and U.K. stocks rallied. Gilts rose following their worst quarter since June 2008 when government securities tumbled after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce debt purchases this year. Mark Carney took the helm at the Bank of England today before a policy meeting this week.

“Investors are looking to buy sterling given the U.K. PMI and mortgage approvals,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. U.K. stocks are rising “and the pound is again benefiting in turn.”

The pound advanced 0.2 percent to $1.5247 at 4:45 p.m. London time after falling to $1.5166 on June 28, the weakest level since May 31. The U.K. currency was little changed at 85.67 pence per euro.

A gauge of U.K. manufacturing rose to 52.5 in June from 51.5 the previous month, Markit Economics and the Chartered Institute of Purchasing and Supply said in London. A reading above 50 shows expansion. Lenders granted 58,242 home loans in May, the most since December 2009, according to a separate report from the Bank of England.

The FTSE 100 Index of U.K. shares gained 1.5 percent.

Sterling has strengthened 3.2 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro gained 5 percent and the dollar advanced 3.1 percent.

Gilts Gain

The yield on the benchmark 10-year gilt fell two basis points, or 0.02 percentage point, to 2.42 percent. The 1.75 percent security due in September 2022 gained 0.175, or 1.75 pounds per 1,000-pound face amount, to 94.505.

Carney will lead his first meeting as Bank of England governor on July 3-4 and will assess whether further aid to the economy is needed to support the recovery. Policy makers will maintain the central bank’s bond-purchase target at 375 billion pounds and the benchmark interest rate at 0.5 percent, according economists surveyed by Bloomberg News.

Overseas investors became net buyers of gilts in May after cutting their holdings in April for the first time in 10 months, according to a report today from the Bank of England. Foreign investors bought 6.9 billion pounds of gilts more than they sold in May, the data showed.

Gilts handed investors a loss of 3.5 percent this year through June 28, according to Bloomberg World Bond Indexes. German bonds dropped 1.7 percent and Treasuries declined 2.8 percent, the indexes show.

Before it's here, it's on the Bloomberg Terminal.