By Beth Mellor and Paul Dobson Nov. 20 (Bloomberg) -- The pound fell against the dollar, the euro and the yen on concern that the U.K.’s worst budget deficit since records began will hamper the nation’s recovery. The pound slid to its lowest level in more than two weeks against the U.S. currency. Britain’s 11.4 billion- pound ($18.9 billion) budget deficit in October was the worst for the month since records began in 1993, data from the Office for National Statistics showed yesterday. A decline in stocks helped spur demand for the yen as a refuge and push it to the highest level against the pound since Nov. 3. “People are realizing that things are not looking too bright for high-debt countries,” said Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA. “People regard sterling as a higher-risk premium.” The pound fell 1.1 percent to $1.6487 as of 1:05 p.m. in London, after earlier sliding to $1.6461, its lowest level since Nov. 4. It weakened 0.4 percent to 89.92 pence per euro and slid 1.1 percent to 146.66 yen. The pound also declined as the U.K.’s biggest business lobby called for “ambitious” reductions in the budget deficit to allow the central bank to keep rates low. Richard Lambert, director general of the Confederation of British Industry, said keeping interest rates lower for longer “would have an impact on sterling.” ‘Tightening Expectations’ The Organization for Economic Cooperation and Development said yesterday the Bank of England should keep the benchmark interest rate at a record low until 2011. “Monetary tightening expectations will be taken out and the pound will drop back,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. The pound is poised to snap three weeks of advances versus the dollar after minutes from this month’s Bank of England meeting showed policy makers split three ways on whether to extend asset purchases and discussed cutting the deposit rate on reserves. The Bank of England Monetary Policy Committee has been divided between those who favor more aggressive action to overcome the longest recession on record and others who have said the stimulus measures may already be succeeding. Chief Economist Spencer Dale favored no change at the Nov. 5 meeting, according to the minutes. David Miles sought a 40 million-pound expansion. Former Bank of England Deputy Governor John Gieve said in Dubai today that the U.K. economy may have passed a “turning point” as the pound’s slide helps it recover from the longest recession on record. “The level of the pound is going to help the U.K. to benefit from a resurgence in world manufacturing,” Gieve said. A majority of policy makers voted on Nov. 5 to boost the asset-purchase plan by a less-than-forecast 25 billion pounds. Government bonds rose, pushing the yield on the 10-year gilt down 3 basis points to 3.63 percent. The two-year note fell 2 basis points to 1.23 percent. To contact the reporter on this story: Beth Mellor in London at bmellor@bloomberg.net

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