By Lucy Meakin
Nov. 25 (Bloomberg) -- The pound traded near its strongest in nine weeks against the euro on mounting concern that Ireland?s bailout will fail to stem the euro region?s sovereign debt crisis.
Sterling extended losses against the dollar for a fifth day. Spanish and Portuguese bonds declined on speculation the nations will have to follow Ireland and Greece in asking for European Union assistance. The U.K. Chancellor of the Exchequer George Osborne has pledged a 7 billion-pound ($11 billion) loan to bolster the Irish bailout saying on Nov. 22 ties between the two countries made it ?overwhelmingly? in British interests.
?For the time being the pound will continue to take its cue from what?s happening in the euro area and whether people want to worry about contagion to sterling in terms of trade,? said Paul Robson, a senior foreign exchange strategist at Royal Bank of Scotland Group Plc in London. ?Further declines in terms of euro-sterling look likely.?
The pound traded near yesterday?s highs at 84.63 pence per euro at 12:06 p.m. in London, paring an earlier 0.3 percent gain against the common currency. It appreciated to the strongest since Sept. 21 yesterday. Sterling fell 0.1 percent to $1.5752 after reaching $1.5733, its weakest since Oct. 27.
Gilts fell after members of the Bank of England?s Monetary Policy Committee, which remains split on a possible extension of its asset-purchase program, gave no indication the central bank plans to step up so-called quantitative easing to support the economic recovery.
Bank Governor Mervyn King told lawmakers in London that policy makers view inflation risks as ?broadly balanced? at present and are ready to tighten or loosen policy as needed.
The Confederation of British Industry said its U.K. retail- sales index rose in November and stores expect momentum to continue next month in the run-up to Christmas.
U.K. government bonds fell, pushing the 10-year yield up four basis points to 3.37 percent. The two-year note yield rose three basis points to 1.03 percent.
--Editors: Mark McCord, Peter Branton.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
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