By Paul Dobson Nov. 9 (Bloomberg) -- The pound rose to its highest level against the dollar in three months as equities advanced amid increased demand for higher-yielding assets. The British currency was little changed against the euro after earlier trading at a seven-week high as the Group of 20 governments agreed to retain stimulus measures. The FTSE 100 Index rose 1.4 percent, heading for its longest streak of gains since September. The Bank of England will probably say in its quarterly inflation report on Nov. 11 that the economy is stabilizing, according to Deutsche Bank AG strategist Henrik Gullberg. “The market is determined to continue this risk-appetite rally,” London-based Gullberg said today by phone. “The pound is still undervalued, especially against the euro. Every time we have positive news, that means a move toward fair value.” Sterling rose 1 percent to $1.6772 as of 1:34 p.m. in London, after earlier trading as high as $1.6843, the most since Aug. 6. It was little changed at 89.37 pence per euro after appreciating to as high as 88.98 pence, the strongest since Sept. 17. Britain’s central bank said Nov. 5 there are signs the economic recovery is taking hold as it expanded its asset- purchase program 25 billion pounds ($42 billion) less than had been forecast in a Bloomberg survey to 200 billion pounds. U.K. manufacturing rose 1.7 percent in September, the Office for National Statistics said Nov. 5, more than analysts’ predictions of a 1 percent gain. The statistics office will say on Nov. 11 the number of people signing on for jobless benefits rose by 20,000 in October, the slowest increase since May 2008, according to the median of 28 estimates in a Bloomberg survey. Decreased Bets Futures traders decreased their bets that the pound will decline against the dollar for a third successive week before last week’s debt-buying decision by the Bank of England. So- called net shorts dropped to 18,905 on Nov. 3, compared with 31,431 a week earlier, figures published Nov. 6 from the Washington-based Commodity Futures Trading Commission show. “Economic and financial conditions have improved following our coordinated response to the crisis,” finance ministers and central bank governors of the Group of 20 nations said in a Nov. 7. statement. “To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured.” U.K. government bonds rose, pushing the yield on the 10- year note lower after five straight increases last week. The 10- year gilt yield fell 4 basis points to 3.85 percent. The yield on the two-year security fell 7 basis points to 0.74 percent. “After the Bank of England meeting we had a really strong uptick” in bond yields, said Karsten Linowsky, a fixed-income strategist in Zurich at Credit Suisse Group AG. The yield at close to 3.90 percent on the 10-year note makes the product “more attractive” for investors, he said. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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