British Pound Climbs Against Dollar, Euro Amid Rising Stocks

By Agnes Lovasz

Nov. 3 (Bloomberg) -- The pound climbed against the dollar and euro on speculation rising stocks are reviving risk appetite, boosting demand for the British currency.

The FTSE 100 Index, a U.K. equity benchmark, will probably jump 84 to 4,461, according to Matt Buckland, a trader in London at CMC Markets. The MSCI Asia Pacific Index of equities advanced 2.2 percent and futures on the Standard & Poor's 500 Index gained 0.6 percent. An industry report today may show manufacturing contracted last month.

The pound climbed to $1.6379 as of 7:32 a.m. in London, from $1.6076 at the end of last week. The U.K. currency dropped 9.7 percent in October, the steepest monthly decline since 1992. Against the euro, the pound rose to 78.59 pence, from 79.22 pence.

The Bank of England meets on Nov. 6 to decide interest rates. The median forecast of 60 economists surveyed by Bloomberg predicts policy makers will lower the key rate by half a percentage point to 4 percent. The implied yield on the short- sterling futures contract due in December declined 43 basis points last week to 4.21 percent, signaling a reduction is expected.

U.K. policy makers cut rates on Oct. 8 in concert with other major central banks in an effort to stave off a collapse of the financial system.

Economic Slump

Britain's economy is shrinking amid the fallout from the global credit crisis. A government report Oct. 24 showed a greater-than-forecast 0.5 percent contraction in the third quarter. A gauge of consumer willingness to make major purchases dropped to minus 42 last month, the lowest level since the series began, GfK NOP said last week. House prices fell in October by the most since at least 1991, Nationwide Building Society also said.

The Chartered Institute of Purchasing and Supply's index of manufacturing, based on a survey of factories, probably fell to 40.1 in October from 41 the previous month, the lowest since the report began in January 1992, according to a media forecast of economists. The manufacturing report is due at 9:30 a.m. in London.

The yield on the two-year gilt fell 16 basis points last week to 2.93 percent as investors sought shorter-maturity government assets. The 4.75 percent security maturing in June 2010 rose 0.22, or 2.2 pounds per 1,000-pound ($1,636) face amount, to 102.82. Ten-year yields increased 17 basis points last week to 4.52 percent. Bond yields move inversely to prices.

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