Pound advances vs. dollar as BOE maintains bond-buying target

The pound strengthened against the dollar, rising the most in almost two weeks, as the Bank of England kept its asset-purchase target at 375 billion pounds ($605 billion) at a meeting today.

Sterling fell for a fifth day versus the euro after the European Central Bank kept its main refinancing rate at a record-low 0.75 percent. The median year-end estimate for the pound versus the dollar is at the highest since Nov. 30, according to data compiled by Bloomberg. The Bank of England is likely to boost its bond-buying program next month, ING Groep NV said. Gilts declined, pushing the 10-year yield up the most in almost two weeks.

“Sterling has been a bit soggy recently,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “There’s a little bit of a recovery today. I don’t think any particular positions were taken ahead of the Bank of England meeting.”

The pound rose 0.4 percent to $1.6135 as of 3:06 p.m. London time, after climbing as much as 0.5 percent, the most since Sept. 21. Sterling slipped 0.2 percent to 80.47 pence per euro, after touching 80.52 pence, the weakest since Sept. 19.

The median forecast for the pound against the dollar of 49 analysts surveyed by Bloomberg rose to $1.60 on Sept. 28, up from $1.55 on Sept. 14. FxPro’s Derks said the pound may weaken toward $1.59 this month and reach $1.57 by year-end.

Rate Decision

The Bank of England decision was predicted by all 40 economists surveyed by Bloomberg News. The central bank also kept its key interest rate at a record low 0.5 percent, in line with all 50 estimates in a separate survey.

“There was zero expectation for any further printing today,” Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said before the announcement, referring to the policy of bond purchases. “It is already priced in, so I would not expect there to be any major rally in the pound.”

Sterling has strengthened 0.9 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro gained 1.1 percent, while the dollar weakened 2.9 percent.

The pound may decline as much as 1.2 percent against the dollar if it breaks through a key level of so-called support, Standard Chartered Plc said, citing trading patterns.

A break below $1.6064, the 23.6 percent Fibonacci retracement of the currency’s appreciation between June 1 and Sept. 21, will open up a decline to $1.5912, the 38.2 percent retracement of that move, Callum Henderson, the Singapore-based global head of currency research at Standard Chartered, wrote in an e-mailed report today.

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