The pound was little changed versus the euro after falling for the first day in seven amid concern that Ireland?s debt crisis may spill over into Britain?s financial institutions.
A majority of global investors predict Ireland will default on its sovereign debt, a Bloomberg poll published today shows. Group of 20 leaders meeting in Seoul discussed Ireland?s debt crisis, which has weakened the euro on concern the European Union will need to step in with a bailout. Shares of Royal Bank of Scotland Group Plc, the U.K.-controlled lender that owns Ireland?s Ulster Bank, reached a four-month low yesterday.
?There?s the contagion fear if Ireland is going to continue into a negative tailspin,? said Jeremy Stretch, executive director of foreign-exchange strategy in London at Canadian Imperial Bank of Commerce. ?That could bring front and center the two largest U.K. state-owned banks, who probably have some significant exposure.?
The pound was little changed against the euro to 84.72 pence at 5:02 p.m. in London after declining 0.3 percent. It rose versus the dollar to $1.6169.
?The U.K. is number one in terms of Irish exposure, so there definitely is a risk there,? said Derek Halpenny, head of European currency strategy at Bank of Tokyo-Mitsubishi UFJ in London. ?The greatest concern must be that we haven?t really hit bottom yet.?
The pound fell against 8 of its 16 most actively traded peers. It has declined 2.7 percent against a basket of currencies in 2010, according to Bloomberg Correlation-Weighted Currency Indexes.
U.K. government bonds fell, pushing the 10-year yield up 5 basis points to 3.19 percent. The two-year note yield rose 3 basis points to 1.04 percent. The Treasury today sold 3 billion ($4.8 billion) of 28, 91 and 182-day gilt bills, according to the U.K. Debt Management Office.
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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