The pound weakened to the lowest in a month against the dollar as tensions between North and South Korea escalated, driving investors away from assets perceived to carry greater risks. Sterling gained against the euro as the Financial Times Deutschland said euro-area policy makers are pushing Portugal to seek aid for its economy. North Korea may have conducted a drill by firing artillery near the border with its southern neighbor, Yonhap News reported. Asian and European equities declined and U.S. stock-index futures fell. “We are going to see risk appetite quite severely damaged by the continued developments coming from Asia,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “Sterling is not going to escape that. I would expect the pound to continue to move lower.” The pound may approach $1.5650, near its lows of more than a month ago, he said. The pound fell 0.6 percent to $1.5675 at 11:38 a.m. in London, after dropping to $1.5662, the weakest since October 25. It gained versus the euro, rising 0.6 percent to 84.26 pence. Portuguese officials denied reports the country is being pressed to use the European Union-led rescue fund. Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid. The average yield investors demand to hold 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.52 percent yesterday, a euro-era record. Ministers Meet European finance ministers will probably meet on the afternoon of Nov. 28 to complete the terms of a rescue package for Ireland, an EU official familiar with the situation said. “Reports that they’re trying to accelerate the process in Ireland could be seen on the cross as a sterling positive, so euro-sterling may keep the pressure on the downside as efforts appear to be stepping up in Ireland,” said Stannard. U.K. government bonds rose, pushing the 10-year yield down six basis points to 3.30 percent. The two-year note yield dropped three basis points to 0.99 percent. Britain’s Treasury sold 3 billion pounds ($4.7 billion) of 30, 91 and 183-day gilt bills today, according to the U.K. Debt Management Office. Gilts have returned 6.9 percent this year, compared with a 7.1 percent gain for German bonds and 7.3 percent for U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Sterling has weakened 3.2 percent against a basket of its developed-country peers this year, according to Bloomberg Correlation-Weighted Currency Indexes, making it the third- worst-performing currency after the euro and Norwegian krone. It has appreciated 1.5 percent in the past month. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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