BS: Pound Drops as China Lifts Reserve Requirements, Stocks Fall
By Lukanyo Mnyanda
Feb. 12 (Bloomberg) -- The pound declined against the dollar as U.K. stocks fell after China moved to cool its economy, fueling speculation the global recovery may stall.
Britain’s currency headed for a fourth week of losses as the FTSE 100 index of stocks declined 0.4 percent. The Bank of China said today it would increase commercial lenders’ reserve requirement by 50 basis points effective Feb. 25. The Bank of England forecast this week that inflation will undershoot its target over the next two years and Governor Mervyn King said it’s “far too soon” to say the bank won’t extend its 200 million-pound ($312 billion) asset-purchase plan.
“With sterling being associated with risk appetite and the dollar getting traction with the risk-aversion story, that’s seen sterling moving sharply lower,” said Jeremy Stretch, a currency strategist in London at Rabobank International. “The direct implications are that global growth is perhaps going to be somewhat slower this year.”
The pound declined 0.7 percent to $1.5596 as of 11:37 a.m. in London, leaving it 0.3 percent weaker since Feb. 5. Sterling lost 0.5 percent to 140.32 yen. Against the euro, it gained 0.4 percent to 86.84 pence.
U.K. government bonds advanced, paring a weekly loss. The yield on the 10-year security declined 1 basis point to 4.01 percent and the two-year yield fell 2 basis points to 1.18 percent.
--Editors: David Clarke, Keith Campbell.
To contact the reporter on this story: Lukanyo Mnyanda in London at +44-20-7330-7273 or lmnyanda@bloomberg.net
