U.K. Pound Snaps Seven-Day Drop Against Dollar as Stocks Rise

By Agnes Lovasz

Oct. 28 (Bloomberg) -- The pound climbed against the dollar, snapping a seven-day decline, on speculation rising stock markets will increase demand for the British currency.

The pound also gained versus the euro. The FTSE 100 Index, a U.K. equity benchmark, will probably rise about 7 points to 3,859 at the open, according to Matt Buckland, a trader in London at CMC Markets. Asian stocks advanced today and U.S. equity-index futures increased.

The pound increased 1.2 percent to $1.5739 as of 6:50 a.m. in London, from $1.5552 yesterday. Against the euro, the currency strengthened to 79.90 pence, from 80.33. It fell to a record low of 81.96 pence per euro on Oct. 24.

Britain's currency may be poised for a rebound versus the dollar, according to the relative-strength index, a technical indicator some traders use to forecast price direction. The 14-day RSI on the currency was at 18.7, below the 30 threshold that may signal a recovery.

The pound traded near the weakest in five years against the dollar yesterday and close to its all-time low versus the euro after Hometrack Ltd. said house prices dropped this month by the most since at least 2001. The Sunday Times reported two days ago that Chancellor of the Exchequer Alistair Darling will say in a speech this week that the economic crisis will be deeper and longer-lasting than first predicted.

U.K. government notes declined yesterday, with the yield on the 10-year gilt rising 2 basis points to 4.38 percent. The 5 percent security due March 2018 fell 0.16, or 1.6 pounds per 1,000-pound ($1,573) face amount, to 104.73. The yield on the two- year note rose 3 basis points to 3.12 percent. Bond yields move inversely to prices.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net