Nov. 5 (Bloomberg) -- The pound rose against the dollar after the Bank of England boosted its bond-purchase program by a less-than-forecast 25 billion pounds ($41 billion), adding to evidence the economic recovery is taking hold.
The U.K. currency also advanced versus the euro as policy makers increased asset purchases to 200 billion pounds, compared with the 225 billion pounds predicted in a Bloomberg survey. The euro recovered earlier losses before European Central Bank President Jean-Claude Trichet holds a press conference today following a decision to leave interest rates unchanged. The yen gained as some traders pared bets on higher-yielding currencies.
“The BOE was relatively more hawkish than expected,” said Simon Derrick, the London-based chief currency strategist at Bank of New York Mellon Corp., the world’s biggest custodian of assets. “Can the ECB be more hawkish with an oil price approaching $80 a barrel? Yes they can.”
The pound advanced to $1.6593 as of 1:31 p.m. in London, from $1.6554 yesterday and as low as $1.6467 earlier. The U.K. strengthened to 89.45 pence per euro, from 89.77.
The euro traded at $1.4876 from $1.4861. The yen was at 134.63 per euro, from 134.85, and 90.49 per dollar from 90.72.
The Bank of England’s Monetary Policy Committee left the nation’s key rate unchanged at 0.5 percent today. The ECB held it’s main refinancing rate at 1 percent. Trichet was due to start addressing reporters at 2:30 p.m. in Frankfurt.
Yen’s Gains
The U.K. central bank “believes that the prospect is for a slow recovery in the level of economic activity, so that a substantial margin of under-utilized resources persists,” it said in a statement. “That will continue to bear down on inflation for some time to come.”
The yen advanced against all 16 most-traded currencies as the MSCI World Index dropped 0.3 percent and the Dow Jones Stoxx 600 Index of European shares fell 0.6 percent, fanning speculation investors reduced so-called carry trades. In such trades, speculators sell the currency of a nation with low interest rates to buy higher-yielding currencies elsewhere.
New Zealand’s dollar fell as unemployment rose to the most since 2000 and Reserve Bank Governor Alan Bollard said the nation’s recovery will be slower than Australia’s.
The jobless rate increased to 6.5 percent from 6 percent in the previous three months, Statistics New Zealand said in Wellington today. The median estimate of seven economists surveyed by Bloomberg News was for 6.4 percent.
The so-called kiwi fell to 65.01 yen, from 65.70 yesterday in New York. It dropped 0.8 percent to 71.98 U.S. cents.
U.S. Unemployment
“Uncertainty about the economic recovery is weighing on stocks, fueling risk aversion,” said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “I expect the U.S. jobless rate to get worse. The bias is for yen and dollar buying.”
U.S. unemployment rose to 9.9 percent last month from 9.8 percent in September, according to the median estimate of economists in a Bloomberg News survey before tomorrow’s Labor Department report. Employers eliminated 175,000 jobs in October after a reduction of 263,000 in September, a separate Bloomberg survey showed.
“We will go into the payrolls tomorrow with a slightly more positive attitude toward risk but not massively,” said Derrick. “Can I imagine the dollar coming under a little more pressure? Yes, I can.”
The Federal Reserve yesterday repeated its intention to keep interest rates “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment fails to decline. Policy makers held the target rate for overnight lending between banks between zero to 0.25 percent.
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
Last Updated: November 5, 2009 08:33 EST
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