By Paul Dobson Nov. 11 (Bloomberg) -- The pound fell against the dollar and the euro after Bank of England Governor Mervyn King said a weaker currency should lead to a recovery in the economy. Sterling dropped against all 16 of the most-traded currencies tracked by Bloomberg after the bank published its quarterly inflation report. Inflation may exceed policy makers’ 2 percent target in 2012 even if they start increasing interest rates from a record low, the bank said. The report’s “assumptions were made on the assessment of sterling weakness,” said Hans-Guenter Redeker at BNP Paribas SA in London. “King has said that the British economy needs to rebalance. It can only have substantial growth rates if it can rely on net exports, and for net exports you need to have a currency that allows you to export at a competitive rate.” The pound fell 0.6 percent to $1.6641 as of 11 a.m. in London. It weakened 0.9 percent to 90.37 pence per euro. “The depreciation of sterling should lead to a recovery in economic activity,” King said after the inflation report was released. “The outlook for inflation is again highly uncertain with risks in either direction. By the end the risks are broadly balanced.” To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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