Pound Recovers Losses Against Dollar, Snapping 10-Day Decline

By Andrew MacAskill and Kim-Mai Cutler

Aug. 14 (Bloomberg) -- The U.K. pound rebounded against the dollar after earlier falling for a 10th day, the longest run of declines in more than 37 years.

The British currency rose to $1.8712 as of 7:41 a.m. in London, from $1.8704 yesterday. The 10-day streak was the longest since at least January 1971. The pound traded at 79.69 pence per euro, from 79.76 pence.

Technical indicators suggested the pound was due for a recovery. The 14-day relative strength index was at 17.7 today. A number below 30 signals a change in price direction.

Government bonds rose yesterday. The yield on the 10-year gilt fell 3 basis points to 4.61 percent. The price of the 5 percent security due March 2018 climbed 0.24, or 2.4 pounds per 1,000-pound ($1,868) face amount, to 103.03. The yield on the two- year gilt, which is more sensitive to the outlook for interest rates, declined 17 basis points to 4.50 percent. Bond yields move inversely to prices.

Britain's sputtering economy has already sent the pound below the level at which it's forecast to end 2008. The currency will be worth $1.91 and 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg.

The yield on the 10-year note will end the year at 4.87 percent, according to a separate survey.

The pound fell 7.8 percent against the euro this year. It's down 5.7 percent versus the dollar, after being little changed against the U.S. currency as recently as July 31.

To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net;