U.K. Pound Rises as Concern Over Iran's Missiles Weakens Dollar

By Anchalee Worrachate

July 9 (Bloomberg) -- The British pound rose against the dollar, snapping five days of losses, after an Iranian missile test sent oil prices higher.

The missile, capable of reaching Israel, was fired during war games today, state television said. Oil prices rose for the first time this week, after declining the most in three months, on concern supply from the Middle Ease may be disrupted.

``The pound rebounded against the dollar as the news on Iran pushed the U.S. currency lower via higher oil prices,'' said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank. ``This is a dollar story more than a pound story. In the longer term, we will see the pound as overvalued.''

The pound traded at $1.9720 by 7:45 a.m. in London, from $1.9695 yesterday in New York. Against the euro, it fell to 79.69 pence from 79.57 pence, and to 211.51 yen from 211.73 yen.

Sterling will fall to $1.65 in the next three months, a level representing ``fair value,'' Redeker predicted.

Crude oil for August delivery rose as much as $1.03, or 0.8 percent, to $137.07 a barrel on the New York Mercantile Exchange and was at $136.75. Yesterday, prices tumbled 3.8 percent, the biggest drop since March 31.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@blommberg.net