By Anna Rascouet and Lukanyo Mnyanda Jan. 13 (Bloomberg) -- The pound rose against the dollar and the euro on speculation policy makers may start to weigh interest-rate increases this year as the economy recovers from the recession. Gilts fell as the government sold 39-year bonds. The British currency advanced for a fourth day against the dollar, the longest stretch of gains since November, after the Guardian newspaper cited Bank of England policy maker Andrew Sentance as saying enough has been done to stimulate the economy. Declines in bonds pushed the yield on the 10-year gilt up from near a three-week low as the Treasury sold 2.25 billion pounds ($3.66 billion) of gilts maturing in 2049. “The interview from Sentance is reinforcing the upward bias for sterling,” said Paul Robson, senior currency strategist at Royal Bank of Scotland Group Plc in London. The pound rose 0.7 percent to $1.6273 as of 4:47 p.m. in London after reaching $1.6294, its highest level since Dec. 17. Sterling also strengthened 0.7 percent to 88.98 pence per euro, the first time it appreciated above 89 pence since Jan. 4. The Bank of England may adopt a “wait-and-see” approach to review the effectiveness of its so-called quantitative easing program, Sentance said, according to the Guardian. Policy makers have to consider raising rates as “there are global influences such as oil and commodity prices and the impact of the exchange rate, which can lead to speed limits for the rate of growth,” the newspaper quoted him as saying. Industrial Production The central bank has cut its benchmark rate to a record low and is buying 200 billion pounds of bonds to keep borrowing costs depressed as it seeks to haul the economy out of its worst slump since at least 1955, when records began. The bond-buying program is scheduled to expire next month. The British currency extended its advance as the Office for National Statistics said industrial production grew 0.4 percent in November, after stalling the month before. The median of 27 estimates in a Bloomberg survey was for a 0.3 percent expansion. Traders pared bets that the Bank of England will hold its key interest rate at 0.5 percent, with the implied yield on the June short-sterling futures contract rising as much as 3 basis points earlier to 0.85 percent. It was little changed at 0.82 percent later. The 10-year gilt yield increased 3 basis points to 3.96 percent, snapping a two-day decline. It dropped to 3.92 percent yesterday, the lowest since Dec. 23. The 4.5 percent security due March 2019 lost 0.22, or 2.2 pound per 1,000-pound face amount, to 104.11. The two-year note yield advanced 4 basis points, to 1.21 percent. ‘Turning Point’ The U.K. Treasury attracted bids for the 2049 bonds that were 1.81 times the amount offered, the Debt Management Office in London said today. That compares with a bid-to-cover ratio of 2.3 at the last sale of the securities in June. “We are at a turning point in terms of monetary policy, and that’s true of most central banks,” said Kornelius Purps, a fixed-income strategist in Munich at UniCredit Markets & Investment Banking. “No-one is really concerned about supply this year, but what about next year and the year after? Supply will be higher for the next decade.” U.K. gilts returned 0.6 percent this month, after recording their first loss in a decade in 2009. That compares with a 0.8 percent gain for U.S. Treasuries and a 0.6 percent advance for German bonds, according to Bank of America Merrill Lynch Indexes.

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