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Thursday, October 8, 2009
The pound advanced to the highest level this month against the dollar as the Bank of England left its bond-purchase program unchanged and kept its main interest rate at a record low.
Sterling also climbed versus the euro and the yen after the central bank said it wouldn’t add to the 175 billion pounds ($282 billion) it has committed to the asset-purchase plan, as predicted by all 42 economists in a Bloomberg survey. Policy makers may consider enlarging the program after reviewing it next month, former Deputy Governor John Gieve said two days ago. Gains by stocks also bolstered the currency.
“There should be a little bit of relief for sterling because there’s always a risk of a surprise,” said Daragh Maher, deputy head of global foreign exchange at Calyon, the investment-banking unit of Credit Agricole SA. “But because we had quite a strong morning for sterling it might not have the same bullish impact as it could have done.”
The pound advanced 0.8 percent to $1.6089 as of 5 p.m. in London, after rising to $1.6114 earlier, the highest level since Sept. 30. It strengthened 0.2 percent to 91.84 pence per euro, after weakening as much as 0.3 percent. It climbed 0.5 percent to 142.22 yen.
Policy makers also left their main rate at 0.5 percent, as forecast in a separate Bloomberg survey.
The yield on the two-year gilt fell to 0.69 percent, the lowest level since at least January 1992, according to Bloomberg generic prices. The 10-year yield declined 3 basis points to 3.36 percent.
The 4 percent 2022 gilt extended gains after the Bank of England said the bond will be included in its asset-purchase program from next week. The yield on the security fell 4 basis points to 3.60 percent.
Stocks Rise
Sterling climbed 0.6 percent against the dollar and 0.5 percent versus the euro on Sept. 10, when the Bank of England left the asset-buying program unchanged. It lost 0.8 percent against the euro and 1.2 percent against the dollar on Aug. 6, when the central bank unexpectedly extended it by 50 billion pounds.
The country’s benchmark stock gauge, the FTSE 100 Index, rose 0.9 percent, and Europe’s Dow Jones Stoxx 600 Index advanced 1.3 percent.
The “next decision point” for the Bank of England will be the Nov. 5 meeting, Gieve said in a Bloomberg Television interview on Oct. 6. Increasing the bond program next month, when the bank will have new economic forecasts, “will be an option they’ll look at pretty closely.
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