BLBG: Pound Climbs as Consumer Confidence Rises; Won Gains on Stocks
By Yasuhiko Seki and Ron Harui
Feb. 3 (Bloomberg) -- The pound rose on data showing U.K. consumer confidence improved in January, while South Korea’s won led gains among Asian currencies as regional stocks extended a global rally.
Britain’s currency advanced against 14 of its 16 major counterparts on prospects authorities will rein in easing measures as the nation emerges from its worst recession on record. The won climbed for a second day against the dollar on expectations a global economic recovery will boost demand for emerging-market assets.
“Speculation that some Bank of England policy makers will express a hawkish view on the economy and monetary policy is supporting the pound,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow in Tokyo.
The British currency rose to $1.5991 as of 2:36 p.m. in Tokyo from $1.5973 in New York yesterday. The pound climbed 0.2 percent to 144.66 yen. Japan’s currency was at 126.28 per euro from 126.21 in New York, when it reached 126.69, the weakest level since Jan. 28.
The dollar traded at 90.46 yen from 90.38 yen. The greenback was at $1.360 per euro from $1.3965 yesterday. The won strengthened 0.8 percent to 1,150.40 per dollar. It sank to 1,174.9 on Feb. 1, the weakest level since Dec. 28.
The MSCI Asia Pacific Index of equities rose 1 percent after the Standard & Poor’s 500 Index yesterday capped its biggest two-day rally since October. The S&P 500 gained 1.3 percent at the close of trading in New York.
BOE Meeting
U.K. consumer sentiment increased 3 points to 73 in January from the previous month, according to a report today by Nationwide Building Society, a customer-owned lender. That’s almost double the level of 39 measured in the same month last year.
Britain returned to economic growth in the fourth quarter as house prices increased and unemployment began to decline, establishing a recovery in time for the election due by June. The Bank of England completed its 200 billion-pound ($325 billion) asset-purchase program on Jan. 26 and will decide whether to continue so-called quantitative easing at its next meeting tomorrow.
The won climbed as foreign investors bought more Korean shares than they sold amid signs that the global economy is recovering.
Sales of previously owned U.S. homes rose 1 percent in December after a drop of 16 percent in November, the National Association of Realtors said yesterday. Brazil’s industrial production jumped a greater-than-expected 18.9 percent in December from a year earlier, government data showed.
Pimco Warning
“Global stock markets are gaining strength and it’s the same in Korea,” said Ko Yun Jin, a currency dealer at Kookmin Bank in Seoul. “Foreigners are buying stocks. Around the 1,160 level, there were a lot of exporters selling so it was hard for the Korean won to weaken.”
The recent upturn in stocks worldwide may not be sustainable, according to Mohamed A. El-Erian, whose firm runs the world’s biggest mutual fund.
Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, the chief executive officer of Pacific Investment Management Co. wrote in a Bloomberg News column. That means Wall Street projections for gains in 2010 may prove incorrect and prices will slump, he said.
“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote.
The Standard & Poor’s 500 Index fell 3.7 percent in January, more than any month since February 2009, after China set higher reserves for lenders and U.S. President Barack Obama proposed curbs on risk taking at banks.
Greece Concerns
The euro fell against the pound amid concern fiscal deficits in Europe will worsen, damping demand for assets in the 16-nation region.
Nouriel Roubini and Arnab Das of Roubini Global Economics wrote in the Financial Times that Greece needs an “austerity plan” backed by the International Monetary Fund.
A “credible austerity plan” for Greece should ideally be backed by a large IMF program to prevent a run on public debt and banks during the tough times ahead, Roubini and Das wrote. A European Union-only framework may be seen as a fudge by interested parties, given the risks to Europe of failure, they wrote.
The European Commission will recommend in a report today that finance ministers endorse Greece’s plan to reduce the nation’s budget deficit. Prime Minister George Papandreou’s three-year roadmap outlined last month includes steps to cut spending and raise revenue by 10 billion euros ($14 billion) this year. The proposal “is feasible but subject to risks,” European Commission President Jose Barroso said yesterday.
The euro traded at 87.29 pence from 87.42 pence in New York yesterday. It reached 86.03 pence on Jan. 28, the lowest level since Aug. 20.
-- With assistance from Lynn Thomasson in New York, Lilian Karunungan and Patricia Lui in Singapore. Editors: Rocky Swift, Nate Hosoda
To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
