Pound Rises Versus Dollar as Home Prices Gain for Seventh Month

By Beth Mellor

Dec. 1 (Bloomberg) -- The pound advanced against the dollar after a report showed U.K. house prices rose for a seventh month in November.

Sterling snapped three days of losses against the U.S. currency after Nationwide Building Society said the average cost of a home increased 0.5 percent to 162,764 pounds ($266,916). The pound was little changed against the euro as an index compiled by the Chartered Institute of Purchasing and Supply and Markit Economics showed U.K. manufacturing expanded last month less than economists predicted. The pound slipped 0.1 percent against the U.S. currency in November.

“Economic data could come to the pound’s rescue, but we are not holding our breath,” Steven Barrow, head of group of 10 currency strategy at Standard Bank Plc in London, wrote in a research report today.

The U.K. currency rose to $1.6507 as of 9:40 a.m. in London, from $1.6440 yesterday. It was little changed at 91.26 pence per euro.

Gains by the pound may be limited amid a slower recovery in the U.K. than in the rest of Europe and the U.S. While the 16-nation euro region and the U.S. exited recession, U.K. gross domestic product dropped in the third quarter.

The U.K. is “likely to limp out of recession, certainly relative to its global peers,” Morgan Stanley strategists Graham Secker and Catharina Luebke-Detring wrote in a note to clients dated yesterday. An indecisive U.K. election result next year may also weaken the pound, they said.

“At the current juncture a lack of leadership from the top could have severe ramifications for foreign-exchange and bond markets and could prompt a sharp drop in sterling,” the analysts wrote.

U.K. gilts fell, pushing the yield on the 10-year note up 2 points to 3.54 percent. The yield on the two-year note advanced 1 basis point to 1.18 percent.

To contact the reporters on this story: Beth Mellor in London at bmellor@bloomberg.net