Pound Rises Against Dollar on Signs of Global Economic Recovery

By Anna Rascouet

Jan. 11 (Bloomberg) -- The pound rose against the dollar for the third time in four days as stocks advanced on signs the global economic recovery is gathering momentum and a report showed U.K. businesses are more optimistic than a year ago.

The British currency also strengthened against the yen as the FTSE 100 Index jumped as much as 0.9 percent, the most in a week, following a Chinese report showing exports climbed 17.7 percent from a year earlier and imports surged 55.9 percent. Grant Thornton U.K. LLP and Experian Plc said a net 16 percent of unlisted U.K. companies surveyed are confident about their prospects for 2010, up from net minus 47 percent a year earlier.

“You have to look at the general backdrop,” said Neil Mellor, a London-based currency strategist at BNY Mellon Corp. “If risk appetite is on the rise, then sterling will rise against the dollar. The news is mixed, but this is broad positive sentiment that’s behind the move.”

The pound rose 0.8 percent to trade at $1.6149 as of 10:27 a.m. in London today. It appreciated 0.7 percent to 149.46 yen, and weakened 0.1 percent to 89.82 pence per euro.

The yield on the 10-year gilt was little changed at 4.06 percent. The two-year note yield also stayed little changed at 1.25 percent.

While optimism for Britain’s private companies rose, a separate report showed U.K. financial-services companies are more pessimistic than at any time in the past year on the outlook for business growth. The Confederation of British Industry said today the number of companies expecting a reduction in business volumes in the first quarter was 13 percent more than those anticipating an increase.

The pound’s gains today came in the wake of seven weekly declines in eight against the dollar as investors bet Prime Minister Gordon Brown’s bid to renew his term the next election this year will drive him to deepen the nation’s budget deficit, hurting the nation’s credit rating.

Pacific Investment Management Co.’s Head of Global Portfolio Management Scott Mather told the Wall Street Journal last week that the U.K. has an 80 percent chance of seeing its credit rating cut if it maintains its current debt-reduction plan.

To contact the reporter on this story: Anna Rascouet in London arascouet@bloomberg.net.