BLBG: Pound Weakens as Some Traders Bet on Increased Asset Purchases
By Lukanyo Mnyanda
Feb. 4 (Bloomberg) -- The pound weakened against the dollar as some investors bet that the central bank may opt to boost asset purchases today to safeguard the recovery.
Britain’s currency fell for a second day versus the yen. The Bank of England will keep its main interest rate at a record low of 0.5 percent today, according to all 61 economists surveyed by Bloomberg. Economists are also unanimous that the bank will pause its bond-buying program, according to a separate poll. Lloyds Banking Group Plc’s Halifax division may also say house-price growth slowed last month, according to another survey of economists.
“The overwhelming consensus is that they will pause but from a risk-reward perspective it makes sense to be short the pound given that it will be vulnerable to any dovish surprise,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “There is a non-negligible risk they might spring a surprise.”
The pound fell 0.1 percent to $1.5873 as of 8:44 a.m. in London, after sliding 0.5 percent yesterday. Sterling lost 0.3 percent to 144.24 yen. It climbed 0.1 percent to 87.30 pence per euro.
The 10-year gilt yield was little changed at 3.91 percent and the two-year yield was at 1.19 percent.
The 200 billion pounds ($318 billion) spent by the bank on its bond-buying program since March is equivalent to almost 89 percent of the 225 billion pounds of bond sales planned by the Debt Management Office for the fiscal year through March.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
