Pound Advances Versus Euro Before King Testimony to Parliament

By Andrew MacAskill and Lukanyo Mnyanda

Sept. 11 (Bloomberg) -- The British pound rose for a sixth day against the euro, the longest run of gains in 20 months, and was little changed versus the dollar before Bank of England Governor Mervyn King testifies to members of Parliament.

The currency rose to its highest level in more than two weeks against the euro before King's discusses interest-rate policy with the Treasury select committee. Deputy Governor John Gieve said in an interview with the Irish News yesterday that inflation may accelerate, weakening the case for an interest-rate reduction.

``My expectation is that King is going to disappoint anyone looking for an early sign of a rate cut,'' said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. ``This will give sterling a short-term boost.''

The pound increased to 79.54 pence per euro as of 9:13 a.m. in London, from 79.88 pence yesterday. It advanced 2.6 percent during the streak, the longest since the six days ended Jan. 15, 2007. Against the dollar, the U.K. currency was little changed at $1.7523, from $1.7530 yesterday.

Central bank policy makers kept interest rates at 5 percent for a fifth month on Sept. 4 as inflation risks prevented them from cutting borrowing costs to spur growth. The bank is due to release the minutes of the meeting Sept. 17.

The pound's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, rose 0.3 percent to 86.19, paring its loss this year to 9 percent, according to Deutsche Bank AG. The measure has rebounded from the lowest level since at least 2000 last week.

Government bonds were little changed. The 10-year yield added 1 basis point to 4.46 percent. The 5 percent security due March 2018 fell 0.07, or 70 pence per 1,000-pound ($1,752) face amount, to 104.11.

The yield on the two-year note, which is more sensitive to interest-rate expectations, was little changed at 4.44 percent. Bond yields move inversely to prices.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net